According to the community property system, each spouse has an undivided one half interest in the community property[i]. The spouses’ interest is equal, undivided, immediate and vested. Spouses cannot alter their domicile state, by choosing to contract in another forum and contractually consenting to the application of that forum’s laws.
With regard to community property, spouses have fiduciary duty towards each other. The removal of community property without spousal notice or approval constitutes a breach of such duty. If a spouse conveys or disposes of community property in fraud of the other spouse’s rights, the aggrieved spouse has a right of recourse, first against the property or estate of the disposing spouse and, if that proves to be of no avail, then the aggrieved spouse may pursue the proceeds to extent of his or her community interest into the hands of the party to whom the funds have been conveyed.
Generally, the right of the spouses to contract with each other during their marriage regarding their property rights depends upon statute and varies among the different jurisdictions. Uniform Marital Property Act abolished restrictions on the power of spouses to enter into property transactions with each other. Spouses have a constitutional right to make an agreement exchanging between themselves the community interest of one spouse in any property for the community interest of the other spouse in other community property. A transaction between spouses, to be valid must be fair and reasonable and voluntarily and understandingly made.
Some statutes permit transmutation of property if it is made by an express declaration which contains language expressly stating that the characterization or ownership of property is being changed. The Uniform Marital Property Act provides that spouses may reclassify their property by gift or by a marital property agreement.
In the absence of special circumstances, a husband has the exclusive right to represent the community in litigation involving community property. However, the wife sometimes may maintain an action to avoid a transfer of community property made by the husband in violation of statutory restrictions on his power of disposition. Moreover, the wife may sue to recover community property when, for reasons of public policy, the husband could not maintain the action, and when the spouses’ interests are antagonistic. Furthermore, a judgment rendered against the husband concerning the title to community real property is not binding on the wife, when the judgment was obtained in fraud of her interest and she was not named as a party.
i] In re Norton, 180 B.R. 168 (E.D. Tex. 1995)