Estate of Wall

JAKE WALKER Most of us have relied on a spouse’s signed, delivered, and recorded quitclaim deed to conclude that the real estate is separate property. That is not necessarily so under the California Appellate Court’s recent decision in Estate of Wall (2021) 68 Cal.App.5th 168. The surprising decision is important to estate attorneys, as well as family and real property attorneys dealing with real estate titles involving married people.

Background Facts:

Benny and Cindy married in 2008. Benny had two children by a prior marriage. They agreed to keep their assets separate and did not commingle. Neither was employed during the marriage. In 2010, Benny bought a home with his separate property, taking title as “a married man as his sole and separate property.” Cindy signed a quitclaim deed (“QCD”) in favor of Benny and was not a coborrower on Benny’s loan. After Benny died intestate in 2016, Cindy claimed the house was community property and thus passed 100% to her. Benny’s children asserted the QCD and established that he used separate property income to make the down payment and all mortgage payments (pension and social security). Cindy never publicly claimed an interest during his life. Cindy testified that when she signed the QCD, Benny assured her the deed “meant nothing.” She claimed she had provided $3,500 funds to Benny “to contribute to a future down payment” before he bought the home. The trial court ruled the home was community property, holding Family Code section 760 (property acquired during a marriage is community property presumption) prevails over Evidence Code section 662 (form of title controls presumption).

On Appeal:

The appellate court explored the conflicting presumptions. It held that the community property presumption did not prevail over the form of title presumption in a post-death case, rather the property’s record title controls. However, the appellate court found that Cindy’s self-serving and uncorroborated assertions invoke the presumption of Family

Code section 721 (presumption of undue influence in interspousal dealings). This presumption prevailed over the title presumption and affirmed that the home was community property. [Note: Oddly, the case ignores Family Code section 852—a transmutation requires a writing signed by the spouse adversely affected. Apparently, the trial court found Benny’s undue actions transmuted his property.] The Estate of Wall court extended the theories of two prior cases: In re Marriage of Valli (2014) 58 Cal.4th 1396 and In re Brace (2020) 9 Cal.5th 903. The In re Marriage of Valli court found that an insurance policy solely in the wife’s name, paid for with community property with the husband’s consent, was community property because that presumption supersedes the form of title presumption. The court limited its holding to actions between spouses. And the In re Bracecourt held that the community property presumption permitted the bankruptcy trustee to recover from both halves of an asset titled as spousal tenants in common; there, the community property presumption prevailed over the form of title presumption to benefit third-party creditors. This trend of cases provides obstacles and opportunities. Not only to us practitioners but also to clients and third parties. Perhaps the takeaway is that re-married spouses should consult with qualified estate planning attorneys and not die intestate. View this article at Marinbar.org

James “Jake” Walker is a California State Bar Certified Specialist in Estate Planning, Trust and Probate Law who has practiced law in Marin County for over 45 years. He is a partner in DeMartini Walker & Ghaedi LLP. Mr. Walker has a master’s degree in taxation, was awarded an AV rating and was named as a Super Lawyer of Northern California. He is a long-time member, and a former Director and President, of the Marin County Estate Planning Council. WEBSITE

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