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Respective Interests In Community Property

Community property is the property acquired by spouses during marriage except as gift or inheritance.  This property is jointly owned by both spouses.  Community property can be divided upon divorce, annulment of marriage, or death.

The system of community property provides each spouse equal interest in all the marital assets[i]. The spouses have joint ownership over the property.  Even if a husband has full control over the property this does not reduce the wife’s present interest in it.  Pursuant to the Uniform Marital Property Act (UMPA) spouses can manage and control marital property held in the names of both spouses other than in the alternative only if they act together.

Spouses have a fiduciary relationship among themselves regarding their community assets until their marriage is dissolved.  If a spouse is not informed about the transfer of community assets this amounts to breach of fiduciary duty.  This breach can be termed as fraud on community.  Even if the spouse who transfers the property has no intention to commit fraud on the other spouse the action will amount to fraud under law.  The spouse, who is aggrieved by this action, can move against the property of the disposing spouse.  If the disposing spouse has no assets in his/her name, the aggrieved spouse can take action against the person to whom the property has been conveyed without that spouses permission.

The UMPA has abolished restrictions on the power of spouses to enter into property transactions with each other.  This means that spouses can transfer their community and separate property among themselves.  When there is an inter-spousal transfer of community interest, the complete interest over the community property transfers from one spouse to the other.  However, transactions between spouses must be fair, reasonable, voluntarily and understandingly made to be considered as valid.  Some states also provide statutory provisions for transfer of property in the form of gifts between spouses.

Generally, the presumption is that when a property is acquired at the time of marriage it is community property.  However, if there is another agreement between spouses specifying the form in which title can be held between spouses, this can be considered not as community property.  It is not necessary that community property agreements should be witnessed.  But when a community property is transferred the agreement should express in clear language that the characterization and ownership has been changed.  Clear and valid evidence should be provided to prove a valid transaction of community property.  Under any circumstance, a property that has not been acquired cannot be transferred by the spouse even with the permission of the other spouse.  The UMPA provides that spouses should classify their property as property by gift or community property.

Spouses can change the character of their property by changing a separate property to community property and a community property into separate property.  When a community property is changed to a separate property a spouse can transfer interests in that property to a third person without permission from the other spouse.

Without wife’s permission the wife’s separate property cannot be changed to community property[ii.] When there is an oral agreement to transfer the community property there should be valid evidence to prove the transfer[iii]. If a property given as gift is considered as a community property there should be ample evidence that the gift was acquired through legal means and not through fraud or duress[iv].

[i] Carter v. Carter, 813 So. 2d 1237 (La.App. 2 Cir. Apr. 3, 2002)

[ii] In re Marriage of Lund, 174 Cal. App. 4th 40 (Cal. App. 4th Dist. 2009)

[iii] Stockdale v. Stockdale, 102 Idaho 870 (Idaho Ct. App. 1982)

[iv] In re Estate of Harlow, 239 Mo. App. 607 (Mo. Ct. App. 1945)

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