Transmutation issues arise with the parties residence more than any other asset in a divorce.
California Law provides that when you transfer title to your spouse during marriage, you no longer have separate property interest in the residence because you have now “gifted” it to the spouse with what is called a “transmutation.” However, any funds that were placed into the property prior to marriage are still separate property because that money has not changed character unless you transmute that as well. Transmutation is changing the character of an asset by way of a writing. You can transumate anything, whether it is your house, car, inheritance or personal property.
The major case on this is In Re Marriage of Weaver which held:
That a deed which changes title from separate property to community property, whether it is listed as joint tenants or tenants in common, is sufficient to convey the parties intention of transmutation or, in other words, to gift the separate property interest in the residence to the spouse.
The spouse who conveyed his/her interest can still received Family Code Section 2640 contributions, which is money traced to a separate property source of income or funds that was placed into the residence. Transmutation is a common issue in divorces because parties will refinance to add a spouse on a property to receive a better rate, and not know that they have now transmuted half the equity in the property to the other party.
The burden is on the party requesting reimbursement to “trace” the contribution for which he or she is asking to be reimbursed. This might be a check drawn on a trust account the spouse had established before marriage. This might be the sale of a previous home the spouse owned, the funds for which were used to purchase the home. In any case, the reimbursement depends upon that spouse showing by evidence that the funds used to purchase the community property were that spouse’s separate property before they were invested in the community property.