It is not uncommon for one spouse to bring separate property into a marriage such as a house or land. For example, upon marriage, the husband and wife may choose to reside in a house that one of the spouses already owns. That property is generally considered the owner spouse’s sole and separate property. If the parties divorce or separate the other spouse will generally receive no interest in the separate property. That can change, however, if the owner of the separate property puts the other spouse’s name on title to the property. Once that happens, the property is presumed to be a gift to the marital community, in the case of property retitled as community property with right of survivorship, or as a gift of an undivided one-half interest in the property to the other spouse, in the case of property retitled as joint tenancy, with right of survivorship. In either case, a court will likely determine that both spouses have an equal interest in any equity in the property at the time of dissolution or separation even though it was brought into the marriage as one spouse’s sole and separate property.
Sometimes, when one spouse puts the other on title to his or her separate property, the intent is to gift the property to the marital community, or one-half of his or her equity, to the other spouse. Retitling property is a perfectly acceptable tool to make a gift to the marital community or the other spouse. Often, however, the owner spouse had no intent to gift the property to the other spouse, but the owner spouse retitled the property for another purpose. One common reason to put the other spouse on title is for estate planning purposes. The owner spouse will put the other spouse on title to ensure that the other spouse becomes the owner of the property in case of an untimely death. Absent very specific agreements to the contrary, however, the transfer of title presumptively constitutes a gift. Overcoming that presumption as part of divorce or separation proceedings is very difficult. The owner spouse must prove, by clear and convincing evidence, that the transfer of title was intended as something other than a gift.
Because of the presumption that goes along with the act of placing another spouse on title, it is generally not advisable to use a transfer of title as an estate planning tool. While the other spouse will be protected and receive his or her spouse’s sole and separate property if it is retitled, if the parties divorce or separate it is difficult to prove a lack of donative intent. What seemed like a very good idea at the time can become a major headache in the case of divorce or separation and ultimately cost the owner spouse half of his or her interest in what they thought was their sole and separate property.
If couples are concerned about how sole and separate property will be dealt with as part of an estate they should seek the advice of a professional estate planning attorney. The estate planning attorneys in our offices, for example, have a wealth of tools available to provide the protection a couple would seek through a transfer of title, but in a manner that will allow the property to retain its sole and separate nature. Therefore, before a spouse makes a change to his or her sole or separate property, that spouse should seek the advice of an attorney to ensure that no unintended consequences arise.