Interspousal Transfer Deed California: Protecting Community Property During Refinance

Posted February 1, 2023

Many California homeowners have pursued refinancing for better interest rates, but a common pitfall arises when spouses sign an interspousal transfer deed. This seemingly simple act, often required for a more favorable rate, can inadvertently trigger the transmutation of property in California, potentially converting community property into one spouse’s separate property. Understanding these consequences, especially concerning California community property refinance, is crucial to protect your assets during a contested divorce.

What kind of Deed is it?

Once a party knows what type of deed they or their spouse has signed, they can determine how much more work needs to be done to prove their case. Most prominently in our cases, we regularly see:

Quitclaim Deeds; and,
Interspousal Transfer Grant Deeds.

Why does Grant vs. Quitclaim matter?

The answer is that the language in a deed is very important. California law specifically states that a “transmutation of real or personal property is not valid unless made in writing by an express declaration that is made, joined in, consented to, or accepted by the spouse whose interest in the property is adversely affected.”

Interspousal Transfer Grant Deeds

As of now, California law appears settled regarding “standard” Interspousal Transfer Grant Deeds. A “standard” Interspousal Transfer Grant Deed is an express declaration of the spouses’ agreement to change the marital character of a property. The courts have found that the word “grant” means to convey interest, satisfying the “express declaration” requirement of the law. The word “interspousal” quite literally describes the transaction from one spousal to another.

In most cases, we can be confident that transmutation has occurred if a grant deed was executed, and in a divorce situation that can prove extremely problematic for one spouse who has lost their community interest in real property. Never assume your situation is the same as most cases, and make sure you review your deed with an attorney.

Quitclaim Deeds

Typically, in refinance scenarios during marriage, quitclaim deeds are more common than grant deeds. The Courts and the law do not have a definitive answer regarding quitclaim deeds, and the analysis can be highly fact-intensive regarding surrounding circumstances, technical, and dependent on the specific language of the quitclaim deed. Assuming issues of unfair advantage and undue influence do not arise (a topic for another article), arguments regarding quitclaim deeds typically revolve around what is called “title presumption.” Specifically, the law states that “the owner of the legal title to property is presumed to be the owner of the full beneficial title. This presumption may be rebutted only by clear and convincing proof.”

Further Reading » Declaration Of Disclosure

Best Practice

If at all possible, before signing any type of deed transferring your interest to your spouse, it is best to seek advice from an attorney. Preferably spouses enter into clear written agreements detailing the purpose for the quitclaim deed—in this article, to refinance for better interest rates—and their intent to maintain the prior status quo or other new apportionments of property interest, and an agreement to sign a new deed following the refinance.

Be aware of the potential consequences of signing a deed conveying their interest in a property to one spouse alone in order to obtain a more favorable interest rate. The type of deed, whether it be a Quitclaim Deed or an Interspousal Transfer Grant Deed, can greatly impact the outcome in a contested divorce proceeding. It is best practice to seek legal advice before signing any type of deed transferring your interest to your spouse and to clearly document any agreements or intentions regarding the property. If you are considering a refinance and need guidance on an interspousal transfer deed in California, or if you’re facing a divorce and concerned about transmutation of property California law, our Family Law Team at Naimish & Lewis, APC can help. We invite you to schedule an initial consultation to understand your rights regarding California community property refinance and ensure your assets are protected.

Common Law, Divorce, Spousal Support

Robert J. Allison, Esq.

Mr. Allison is a resolution-oriented associate attorney in our Family Law Practice. Even-keeled and fact focused, he is able to assist our clients understand their rights and obligations through the stress and smoke and mirrors presented in their divorce, custody, and domestic violence matters. During the initial consultation, and again once facts and evidence have been collected, Mr. Allison provides various strategies to help clients present their cases, considering cost, time, and client needs. He prides himself in not making false promises to his clients and is unafraid to speak the raw and sometimes harsh reality of how a Court will decide a matter given a specific set of facts and circumstances, both to his clients and to opposing parties. Many potential clients share that they are unhappy with their previous attorneys because they felt a lack of communication, an uncertainty about the family law process and timeline, and they do not understand the strategy in their case or the invoices they receive. While the legal process is complex, Mr. Allison attempts to reduce the confusion through a reasonable case management process involving client participation, because a family law case is often the most difficult period of time in a client’s life.