Is Your House Community Property?

Even though the deed says it belongs to your spouse as his or her separate property? A situation occurring frequently in family law cases is where, after the parties are married, they decide to put the family residence in one spouse’s name for the purpose of refinancing with the intent of getting a better interest rate based upon the other spouse’s bad credit.  The parties eventually split up and the question in the dissolution proceeding is whether the house is community property despite the fact that the deed says the house belongs to one spouse as his or her separate property.
The legal issue presented in this fact pattern is a conflict between the title presumption created by the Evidence Code which essentially says that title is as title says absent clear and convincing evidence to the contrary and the presumption in family law cases that all property acquired during the marriage is community property.  Case law basically says that where these dueling presumptions exist, the later presumption trumps the former presumption.  Thus, the spouse advantaged by the transaction (the person whose name is on the deed) has the burden of demonstrating that the property was put solely in his or her name through no undue influence.  This of course is a presumption that may be rebutted by the advantaged spouse.  Absent settlement, this is an issue that has to be resolved by the family court judge at trial.
If one party freely and voluntarily quitclaims the property to the other with the purpose and intent of obtaining a lower interest rate (which arguably benefits the community), courts have determined that the property is nevertheless a spouse’s separate property.  In perhaps over simplistic words, there can be no undue influence if you know what you are doing and why you are doing it.
Two recent cases, however, have held that a spouse cannot overcome the presumption of undue influence despite the fact that he or she freely and voluntarily agrees to quitclaim the property to obtain a lower interest rate where one spouse makes an oral promise to the other that the property will be deeded back after the refinancing, but the property is never deeded back.  One of these cases will shortly be the subject of a Petition for Supreme Court of California Review.  It is my belief that a conflict will continue to exist in the case law unless and until the Supreme Court of California resolves the issue.
For all of your family law needs, contact the Law Offices of Richard A. Marcus at 661-257-8877.