TL;DR — Key Takeaways
- Both deeds can move a spouse’s interest in California real property to the other spouse. They are not interchangeable, because they carry different tax, reassessment, and warranty consequences.
- An interspousal transfer deed is built for transfers between spouses. It is generally exempt from documentary transfer tax, and the transfer is excluded from property tax reassessment.
- A quitclaim deed transfers only whatever interest the signer holds, with no warranty that they hold anything at all. It is used between strangers and between spouses alike.
- Neither deed, by itself, reliably changes community property into separate property. That takes an express written declaration under Family Code section 852.
- Lenders routinely ask a non-borrowing spouse to sign one of these deeds during a refinance. That signature has consequences worth understanding before the closing, not after.
- In a divorce the deed choice follows the judgment rather than driving it.
An interspousal transfer deed and a quitclaim deed can both transfer a spouse’s interest in California real property to the other spouse, but they are designed for different purposes and they are treated differently for documentary transfer tax, property tax reassessment, and warranty of title. Choosing the wrong one can cost money, and signing either one without understanding what it does can cost considerably more.
A point frequently missed is that neither deed on its own is a reliable way to change community property into separate property. That is governed by a separate rule, covered in transmutation in California.
What an interspousal transfer deed is
An interspousal transfer deed is a grant deed used to transfer an interest in real property from one spouse to the other, or from both spouses to one of them.
Its value lies in how the transfer is treated.
Reassessment. Revenue and Taxation Code section 63 excludes interspousal transfers from the definition of a change in ownership for property tax purposes. That includes transfers to a trustee for a spouse’s benefit, transfers on the death of a spouse, transfers connected with a property settlement or dissolution, and the creation, transfer, or termination of a co-owner’s interest solely between spouses. The property keeps its existing assessed value. For registered domestic partners the parallel exclusion sits in section 62(p).
Documentary transfer tax. Transfers between spouses, including those in connection with a dissolution, are generally exempt from documentary transfer tax, and the interspousal transfer deed form typically recites the exemption on its face. Local transfer taxes in some California cities have their own rules, so confirm the treatment with the county recorder or a tax professional before recording.
Warranty. As a grant deed, it carries the limited implied covenants California attaches to a grant: in substance, that the grantor has not previously conveyed the same interest and that the property is free of encumbrances the grantor created, except as disclosed.
What a quitclaim deed is
A quitclaim deed transfers whatever interest the grantor holds at the time, if any, and makes no promise that the grantor holds anything.
That is its purpose. It is used to clear a possible claim, to release a potential interest, or to transfer an interest where no one wants to warrant title. Between spouses it will convey whatever interest the signing spouse has, but it carries none of the implied covenants of a grant.
A quitclaim between spouses can still qualify for the section 63 reassessment exclusion, because what matters for reassessment is that the transfer is between spouses, not which form was used. But the interspousal transfer deed makes the exclusion and the exemption easier to establish, because the form is designed around them and recites them. A quitclaim may require an additional exemption claim or supporting documentation at recording.
Why neither one reliably changes ownership
This is where people get hurt.
The intuitive view is that if a spouse signs a deed giving their interest to the other spouse, the property now belongs to the recipient. For title purposes, the deed does change who holds record title. But whether the property’s character changed, from community to separate, is a different question with a different answer.
California requires an express written declaration of a change in character, made or accepted by the spouse whose interest is adversely affected. The California Supreme Court has held that the writing must expressly state that ownership or characterization is being changed. A deed that simply conveys an interest, without that declaration, frequently does not meet the standard.
And even a deed that does meet it can be set aside. When a transaction between spouses advantages one of them, the law presumes it was obtained through undue influence, and the advantaged spouse must show the other acted freely, with full knowledge, and with a complete understanding of the effect.
The practical result: a spouse who signed a deed years ago may not have given up what they think they gave up, and a spouse who received one may not own what they think they own. Transmutation in California covers both rules in detail.
If you signed or received one of these deeds and are unsure what it did, that is worth checking before it matters in a divorce or an estate. Call Bay Legal at (650) 668-8000 in Northern California or (213) 668-8000 in Southern California.
The refinance
The scenario that produces most of these deeds.
A couple refinances, and the lender wants only one spouse on the loan, or wants title to match the borrower. Escrow presents the non-borrowing spouse with a quitclaim or an interspousal transfer deed and explains that it is needed to close.
Before signing, three things are worth understanding. The deed may change record title in a way that matters to third parties, including future purchasers and lenders. It may or may not change the character of the property between the spouses, depending on its exact language. And if it is later challenged, the burden may fall on the spouse who benefited to prove the other understood it.
Where the intent is only to satisfy the lender, some couples document that intent in a separate writing signed at the same time, stating that the deed is executed for loan purposes only and is not intended to change the character of the property. Whether that approach fits a particular situation is a question for counsel, because the goal is a record that reflects what the spouses actually agreed.
A Court of Appeal decision in 2011 set aside a refinance quitclaim on exactly this ground: a wife had quitclaimed her interest so her husband could get a better rate, and he could not show she understood she was giving it up.
The divorce
In a divorce the sequence runs the other way. The court divides the community estate under Family Code section 2550, and Family Code section 2650 gives it jurisdiction to do so regardless of how title is held.
The deed follows the division. Once the judgment awards the property to one spouse, the other executes a deed to carry it out. An interspousal transfer deed is the usual choice, because the transfer is incident to the dissolution and qualifies cleanly for the reassessment exclusion and the transfer tax exemption.
Signing a deed before the division is final, outside a settlement agreement, is a different matter and is where the undue influence presumption does its work.
When a deed between spouses is the wrong tool entirely
Some situations call for something other than either deed.
Where the goal is to hold property as community property with survivorship, California offers a specific form of title, community property with right of survivorship, created by an express declaration in the transfer document under Civil Code section 682.1. It carries different income tax basis consequences from joint tenancy at the first spouse’s death, which can matter a great deal and is a question for a tax professional.
Where the goal is estate planning, a transfer into a revocable trust is frequently the better vehicle, because it avoids probate and generally preserves the community character of the property.
And where the goal is to change the character of property deliberately, a transmutation agreement drafted for that purpose, with independent counsel for each spouse, is far more durable than a deed signed at a closing table.
Bay Legal drafts and reviews deeds between spouses and the agreements that should accompany them. Reach us at (650) 668-8000, (213) 668-8000, or through baylegal.com/contact-us.
Frequently Asked Questions
What is an interspousal transfer deed and when is it used?
It is a grant deed used to transfer an interest in California real property between spouses. It is commonly used in a divorce to carry out the court’s division of property, and in estate planning or refinancing to align title. It makes the reassessment exclusion under Revenue and Taxation Code section 63 and the documentary transfer tax exemption easier to establish, because the form recites them.
How does a quitclaim deed differ in a marriage?
A quitclaim transfers only whatever interest the signer holds, with no warranty of title. Between spouses it conveys the signer’s interest just as it would between strangers, and it can still qualify for the interspousal reassessment exclusion. It does not carry the implied covenants of a grant deed, and it may require additional documentation to establish the transfer tax exemption.
Does signing a deed change the character of the property?
Not necessarily. Changing community property into separate property requires an express written declaration under Family Code section 852, which the California Supreme Court has held must expressly state that ownership is being changed. A deed that simply conveys an interest often does not meet that standard, and one that does can be set aside under the presumption of undue influence between spouses.
What are the property tax consequences of each?
Revenue and Taxation Code section 63 excludes transfers between spouses from reassessment, and that exclusion turns on the relationship rather than the deed form, so either deed can qualify. The interspousal transfer deed is designed around the exclusion and the documentary transfer tax exemption. Confirm the treatment with the county assessor and recorder, and with a tax professional for any income tax question.
Which deed is appropriate in a refinance versus a divorce?
In a divorce, an interspousal transfer deed is the usual choice to carry out the judgment’s division of property. In a refinance, lenders commonly request one of the two, and a spouse asked to sign should understand what the deed does to record title and whether it could affect the character of the property before signing, since the answer depends on its exact language.
