Lund Lands With A Thud
The California Court of Appeal’s recent decision in In re Marriage of Lund highlighted the sometimes unintended consequences of estate planning documents upon divorce. In many cases involving the division of property, the parties disagree about whether particular property is separately owned by one spouse, or community property subject to equal division between spouses. Generally, property acquired during marriage is community property, and property acquired either prior to marriage or post-separation is separate property. A party can transfer his separate property to the community, referred to as “transmutation,” by executing written documents showing the transfer which meet specific requirements.
In a recent decision, In re Marriage of Lund, the Fourth District Court of Appeal addressed the transmutation of separate property into community property by way of a written agreement contained in a divorcing couple’s estate planning documents. In that case, while the parties were married, husband executed a document expressing a clear intention to transmute all of his separate property into community property, effective immediately, as part of the couple’s estate plan. When the parties separated, wife argued that husband’s execution of that document transmuted all of his separate property into community property, and thus, that she was entitled to one-half. Husband argued that the document was not intended to take effect unless and until one of them died while married in order to take advantage of the tax benefits of co-ownership upon death, and supported his claim by pointing to language in the document saying that it was being executed “for purposes of estate planning purposes.” At trial, the court held that no transmutation had occurred, agreeing with husband.
The Court of Appeal reversed the trial court’s ruling. The Court of Appeal held that the words in the agreement created a “present, existing, and equal” interest of each spouse in husband’s separate property, constituting “express, unequivocal declarations of a present transmutation.” The court went on to state that the parties’ motivations in executing the documents are simply not relevant in determining whether a transmutation has occurred. The court also concluded that a transmutation, once effected, cannot be limited in purpose or otherwise rendered unconditional or temporary. Thus, husband’s separate property had been transmuted to the community, and wife was entitled to a one-half share thereof.
The Court of Appeal’s decision in In re Marriage of Lund is the latest in a series of significant cases regarding transmutation to be decided over the last several years. At Viola Law Firm, we keep abreast of changes in the law as they occur as part of our constant effort to offer unmatched client service. To discuss the implications of this case on your property dispute, or otherwise discuss your family law issues, please contact us.
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