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Many people do not think about the ramifications of their everyday financing decisions when they are happily married. The consequences of these decisions, however, can prove devastating when they later divorce. The purpose of this article is to provide some guidance to a married person when the need arises to change the manner in which title to a real property is held.  

Given the state of the law in California today, it is of the utmost importance that both spouses' names appear on all legal documents, including title to real property and the loan documents. If in doubt, one should always obtain legal advice before purchasing real property and before making the very crucial decision of how to take title to that property.  

In years past, it did not matter in the state of California whether title to real property was taken in the name of one of the spouses or both. As long as the property was acquired during marriage, then the general rule was that, in the event of a divorce, the property was deemed "community property" (the joint property of the spouses) and was divided equally between the husband and wife. For example, if during the marriage, a real property was purchased in the name of one spouse alone, then in the event of a divorce, the manner in which title was held was irrelevant and the real property was deemed the community property of the parties.  The effect of the law was to presume that every real property that was acquired during marriage the joint property of the spouses, irrespective of whose name was put on the title instrument.  

Recent California case law has changed this outcome drastically. Unbeknownst to most married couples who do not consider divorce when they are buying or refinancing a home, the manner in which title is taken has serious implications upon divorce.   The new law now provides that the manner in which title to a real property will control in the event of a divorce.  

A commonly presented scenario follows:  A married couple decides to buy a home with money earned during the marriage by both or either one of the spouses. When the mortgage broker checks the couple's credit for financing, they learn that the husband's credit is far better than the wife's, and the mortgage broker suggests that the loan be taken in the husband's name alone so that the couple is able to secure a better loan with lower monthly payments, better terms, etc. It also so happens that the wife is not working outside the home at the time of buying the residence, and so the bank does not need the wife's name on the loan anyway. The couple agrees with the mortgage broker's suggestion because the entire family will benefit from lower monthly mortgage payments. Then the loan, and the title to the home, are both taken in the husband's name alone. Per the escrow officer's request, both spouses sign escrow documents, and the wife signs a "Quitclaim Deed", never stopping to consider that she is signing away her community interest in the home by making the husband the sole owner of the home. The home is purchased; the couple moves in and resides in the home throughout their marriage, paying the mortgage payments and all other home expenses with joint income. Several years later, the parties decide to get a divorce and both parties assume that their home is community property and the equity will be divided equally between them by the family law court.  

Pursuant to current California law, the outcome may not be so. What is commonly happening in divorce cases across California is that the wife is told that because the loan was obtained in the husband's name alone, and because she signed a "Quitclaim Deed" to the home, the home is actually the husband's "separate property" and not "community property" as she had presumed. This means that the husband will receive the home, and that it will be considered his separate property. The result is devastating to the wife, and most importantly unintended by either spouse at the time of the acquisition of the home.  What really happens is that at the time of the divorce, the husband receives a windfall, to the detriment of the wife.  

Another example is when a couple purchases a home during the marriage in joint name, and later refinances the home in the name of one spouse alone. When the couple decides to refinance the home, the mortgage broker checks the couple's credit for financing and it appears that husband's credit is better than the wife's, so at time of refinancing the loan be taken in the husband's name alone to secure a better loan with lower monthly payments. Again, in the event of a divorce, according to current California law, title will control, to the detriment of the wife.  

If you are interested in receiving legal advice, feel free to contact us at (323) 653-1600 or  [Link Removed]   

The above information is not, nor is it intended to be, legal advice. You should consult an attorney for individual advice regarding your own situation.

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Member Comments

    • 0 votes vote up vote up

      Bobbi Bacha wrote Oct 19, 2008
    • Wow, I knew the law concerning joint property  I thought it was Community Property, but had no idea that Mortgage brokers were incouraging a “Quit Claim Deed” on properties to secure a loan.  With the recent Mortgage collapse, Im wondering it this would be some sort of future class action.  

      I Texas, all purchases are joint even if the wife does not sign, or husband does not sign.  Im surprized California is not the same.

      As far as a Quit Claim Deed.. its exactly that.. no one should sign one unless they mean to have no claim to the property.  But Im thinking it may clash with community property laws as anything purchased is community property right..?  Unless there is some sort of loop hole for Quit Claim Deeds.

      Great advise and Im still scratching my head concerning the legalities to a Quit Claim Deed being forced upon unsuspecting spouses mostly wives.  

      Interesting information.

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    • 0 votes vote up vote up

      Shopgirl1960 wrote Oct 20, 2008
    • I’m glad this was brought to “light” because lenders are telling couples all the time that they would be better off using only one spouses credit report and name on the deed to get a better interest rate and/or a better chance of getting the loan.

      Thank you for the article!

            Report  Reply

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