Division of Assets and Transfer of Real Property Due to Divorce
Sooner or later the vast majority of divorcing couples come to an agreement on how to divide property of the marriage. First, an agreement is just an agreement. Until a judge signs off on the agreement and issues a final order, the community property and debts still belong to both parties. Only after judgment for dissolution of marriage or an order has been entered by the court can assets of the marriage be divided.
This delay can be a problem for real property held in joint tenancy and a spouse dies before the final judgment or order. In joint tenancy the deceased spouse’s ownership disappears. The surviving spouse becomes the sole owner. To avoid this windfall to the surviving spouse the joint tenancy is severed. The joint tenancy is severed to tenants-in-common.
On death of a tenant-in-common owner, his or her one-half share of the community property is transferred as directed in a Will. There must be a Will, or the laws of intestacy apply. Intestacy law states if there is no Will the default is to transfer community property to the surviving spouse, thus defeating the purpose of a tenant-in-common ownership.
Another potential problem with agreements is the assumption of the debt. A couple may agree on the division of real property and they may agree that whoever receives the property is responsible for the debt on the real property. But this agreement has no effect on the lender. The lender is not a party to the marital agreement. Until the loan is paid off or refinanced the non-owning spouse is still responsible for the loan.
The good news is asset transfers in a divorce are tax free. Transfers of real property do not incur capital gains or income tax at the federal level. In California, Hawaii, Florida and most other states there is no income tax, or capital gains tax on transfers between spouses. Most states do not charge a transfer tax. In California the property tax basis remains the same on spousal transfers and as a result there is no increase in property taxes due to the divorce.
To transfer ownership or change how title is held a deed must be prepared and recorded with the State agency responsible for maintaining official records. This deed is often referred to as an inter-spousal deed. A deed is an 8 ½ inch by 11 inch paper. Prior to judgment or court order the deed changes ownership from oneself as joint tenant to oneself as tenant-in-common. After a court order the deed changes ownership from both spouses to one spouse. This removes one spouse as an owner.
How deeds are recorded and made part of the public record varies from state to state. In California and other Western states records are maintained by county at the “recorders” office. In Hawaii records are maintained by the Bureau of Conveyances. In Florida and other Southern states records are maintained by each county’s clerk of the court.
Severing Joint Tenancy during Divorce in California In California every proceeding for nullity, dissolution, or legal separation, four standard mutual temporary restraining orders are automatically effective. The orders bar both parties from transferring, encumbering, hypothecating, concealing, or disposing of any real property.
Severing joint tenancy does not violate the automatic restraining orders. One spouse may change how title is held from that as a joint tenant to a tenant-in-common. This is according to the Appellate Court in Estate of Mitchell.
“We will hold that the severance of a joint tenancy by recording a declaration of severance is not a "transfer" or a "disposition" of "property." Accordingly, such a severance does not violate either the automatic temporary restraining order in a dissolution proceeding or a similarly worded court-ordered temporary restraining order or preliminary injunction.” Estate of Mitchell (1999) 76 Cal.App.4th 1378
What we do
Title search for how title is held and legal description
Prepare quit claim deed with legal description for signature
Prepare transfer tax exemption report to keep the deed free of transfer tax and property tax increases
File and record the deed and exemption report with the appropriate government entity
Call 949-474-0961 or email Mark@DeedAndRecord.com. Information needed is: real property address, name of ex-spouse, name and address of owning spouse.
For California real property the cost is $149. Cost for Florida is $195 and for Hawaii, $249. Cost includes all filing and research fees. To make payment, click here.
You are sent by mail or email the quit claim deed and preliminary change of ownership report
Document is signed and returned to Mark Bidwell, 18831 Von Karman Avenue, Suite 270, Irvine, California 92612
Document is recorded and returned to you with recorder’s stamp and document identification number