Transmutation occurs during the property division process in divorce. California is a community property state meaning all marital property is equally owned by both spouses. However, this doesn’t mean everything must be divided down the middle. Many assets and debts, like homes and loans, cannot be divided equally unless they are paid off or sold for their profit. That is one reason property division in a community property state is a matter of negotiating a fair division of the overall net-worth of the marital estate. The property being divided just needs to be divided equally. For example, if one spouse takes a large asset, the other may take many, smaller assets. Once the assets are divided fairly, ownership must be changed.
Transmutation is the process of exchanging ownership during property division or any other transaction. For example, if you have two community property cars in your name and your spouse will be taking one in the divorce, you can transmute this property by transferring ownership from the marital community to your spouse. You can also transmute your separate property to your spouse as part of the divorce settlement. This can be done accidentally as well, if you turn separate property into community property. This is called commingling and results in you transmuting your separate property to community property.
Understanding the types of property that can be transmuted is also an important part of division of property. Transmutation means to change form, and in the context of California, Orange County divorce cases, transmutation means that property has changed form or character in one of the following ways:
• Property changed from community property to separate property
• Property changed from separate property to community property; or
• Property changed from one party’s separate property to the other party’s separate property.
Transmutation is explained in the California Family Code Section 850. Transmutations can only occur between spouses or registered domestic partners, and don’t involve third parties (i.e., sellers). The concept does not apply to the initial acquisition of property, but instead to property that is already owned by one or both spouses. Both personal property (i.e., cars) and real property (i.e., the family residence) can be transmuted.
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