For example, a married couple buys a home, with both of their names on the deed. Clearly, the house is intended to be community property, with both partners as owners. But maybe a few years later the couple decides to refinance but one of them has bad credit. To avoid this obstacle, the couple may decide to get a new mortgage with only one of them as a borrower, requiring the person with bad credit to sign their interest in the home to their partner with a quit claim deed. A transmutation has just occurred, and community property home became the property of one person.
Under California law, transmutations aren’t quite so easy when divorce is involved. The law assumes that any transfer of assets between married people happens with undue influence. As a result, the couple must expressly state in writing that they are giving up a property right and that they consent to the transmutation. If this doesn’t happen, a divorce court will generally assume that the parties didn’t intend to transform property from community to separate, and vice versa. This can be a complicated area of the law.