When my wife received her inheritance, we put the money in a joint savings account. Now that we are getting a divorce, is this money her separate property or our community property?
While money inherited is generally considered to be a party’s separate property under California law, your question, properly posed, is: Did the deposit of her separate funds into the joint account transmute that money to community property?
Since January 1, 1985, transmutations in California must be “in writing by an express declaration that is made, joined in, consented to, or accepted by the spouse whose interests is adversely affected.” Estate of MacDonald 51 Cal. 3d 262, 267-268 (1990). MacDonald creates a presumption that property transactions (transfers) between spouses are not transmutations without such written documentation. So, while property titled jointly is presumed community property under California Evidence Code §662, that presumption does not apply if the alleged transmutation fails to meet the threshold established by MacDonald.
The joint tenancy reference on account statements is usually not enough to alter the character of the property in issue. A financial institution’s statement of account identifying the parties as joint tenants is not the type of express written declaration required to validate a transmutation. Estate of Peterson 28 Cal. App. 4th 1742 (1994).
However, contributions to jointly held accounts are considered community property, and absent written notice to the contrary, the financial institution may presume that each beneficiary has an undivided equal interest in the account. Cal. Prob. Code §5305(a) and Cal. Fin’l Code §6852(b). This presumption, except in cases where the parties have executed a valid written agreement clearly evidencing their intent that the sums on deposit be their community property, may be rebutted by adequate tracing to separate property funds. Cal. Prob. Code §5305(b)(1) and Marriage of Braud 43 Cal. App. 4th 797, 825-826 (1996). In Braud the court affirmed a separate property determination where husband could directly trace a $25,000 joint account deposit to a separate property source.
Therefore, because your wife will likely be able to trace the source of the funds in your savings account to her inheritance, much like the husband tracing the $25,000 to separate property in Braud, she will likely overcome the presumption imposed by statute. As such, there is no presumption of community property to rely upon. Unfortunately, without a valid transmutation as described above, the court will likely find that the property is not community property, but rather your wife’s separate property.
Matthew Hosken, J.D., and Pauline M. Rosen, Esq. Ms. Rosen is a family law attorney practicing in Los Angeles and Orange counties; Mr. Hosken is a recent graduate of Loyola Law School and a law clerk to Ms. Rosen.
Pauline Rosen is a divorce attorney and the founder of the Law and Mediation Offices of Pauline Rosen, located in the South Bay (Los Angeles), providing compelling, competent advocacy with compassionate client-centered legal services, including family law, collaborative law, and mediation. She is the recipient of the American Jurisprudence Award in Ethics, Counseling and Negotiation and in Criminal Procedure and is listed in Who's Who (1999). View her website and Divorce Magazine profile.