Estate Planning, Probate and Family Law

Community Property Transmutation Agreement

California is a community property jurisdiction. In general, assets or income acquired during marriage become community property. Assets acquired before marriage are the separate property of each spouse. Assets acquired by one spouse during marriage by gift, bequest, devise or descent are also the separate property of the spouse that receives the property. Property acquired by a spouse while domiciled elswhere that would have been community property if such spouse had been domiciled in California, is called quasi-community property and is treated similar to community property upon death or divorce.

At the bottom of this page you can download a PDF fill-in form version of a “Community Property Transmutation Agreement”. The document is in recordable form and is designed to comply with California Family Code Section 852. This document is provided without warranty and extreme caution should be used before executing this document as it may substantially alter the property rights of any person signing it. This community property agreement is designed to transmute all property owned by a married couple, wherever owned and in whatever form, into community property. You should consult with an attorney in you have any questions regarding the use of this document.

The document is designed to change the character of all of a married couple's existing property, regardless of the character of such property, to community property. This document does not change the character of property acquired in the future. This document is not a replacement for a marital agreement such as a pre-nuptial agreement or post-nuptial agreement.

The characterization of property as community property or separate property is important because it affects how the property is divided or distributed upon death of a spouse or divorce. In general, community property is divided equally upon divorce. At death, community property is distributed to the surviving spouse.

The designation of property as property as “commmunity” or “separate” may affect the also taxation of such property. Prior to 2010, before one-year repeal of the estate tax and step-up basis, community property received a step-up in basis upon the death of one spouse. This allowed a married couple to receive a “double step-up” for community property on the death of each spouse and was advantageous for heirs with respect to income taxation for appreciating property. According to current law, in 2011 the federal estate tax will will return and step-up in basis rules will also resume. At that time, from an income tax perspective, it may be advisable for certain married couples to hold all property as community property. Of course, one should consult with a tax professional to weigh all tax consequences, including, but not limited to property tax, excise tax, estate tax, gift tax, generation skipping transfer tax consequences. Further, the transmutation of property should also fit within the scheme of a person's other family and estate planning goals.

Be advised that this community property agreement does not avoid a probate. The document does not change the title of property and does not vest property as “community property with rights of survivorship”. Other requirements are necessary to vest property as “community property with rights of survivorship”.

Also be aware that a transmutation of real property is not effective as to third parties without notice thereof unless recorded. The fill-in form is provided, in recordable form, to allow for recording in the office of the county recorder where real property is located

Download a Community Property Transmutation Agreement (California Family Code 852)