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 Post subject: General Overview of Community Property and Creditors
PostPosted: Sat Jan 31, 2009 7:08 am 
Partner of Riser Adkisson LLP
Partner of Riser Adkisson LLP
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Joined: Fri Dec 12, 2008 10:13 am
Posts: 934
Location: Newport Beach, CA
("General Rules Are Generally Inapplicable")

In California, property held by individuals are sorted into one of two categories: Separate Property (SP) and Community Property (CP).

Community Property is property that is acquired by the couple during marriage. There is a PRESUMPTION that property acquired during marriage is community property, unless the couple does something to rebut that presumption, such as titling the property in the name of one of the spouses and his or her "sole and separate property". The CP is liable for the debts of either spouse.

Contrast this with separate property, which is only liable and available for the creditors of the particular spouse who owns it. Property becomes Separate Property typically when one of three things happen:

(1) The property is owned by the spouse before marriage, i.e., the spouse is said to have "brought the property into the marriage"; or

(2) The property is inherited by the spouse, or received as a gift from the spouse's family; or

(3) The couple agree that the property will be the separate property of only one spouse.

(3)(a) This is easy if the property is new property, since the spouse can have the title make out to their "sole and separate property" without it ever becoming community property. However, if the property is purchased with community funds when one spouse had unpaid creditors, then what you potentially have is a fraudulent transfer.

(3)(b) If the property was already community property, the couple can make the property the SP of only one spouse by agreement, known as "transmuting" the property into SP. Transmutation agreements are subject to the fraudulent transfer laws. See viewtopic.php?f=50&t=74

So, property that is purchased and maintained with SP funds will stay SP unless the parties indicate their intent that it be CP.

Without an agreement between the spouses as to the character of the property, the property acquired/purchased during marriage is PRESUMED to be CP, but a spouse might rebut this presumption by showing that the property was purchased with SP funds and the spouses' intent was that it be kept SP.

A transmutation agreement need not be notarized or filed anywhere BUT it must be filed as to a particular piece of property for it to be effective as to that property against third parties. See viewtopic.php?f=50&t=75

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