CASE HIGHLIGHTS: Starkman (2005) 129 Cal App 4th 659

FACTS OF STARKMAN:

Christine and Christopher married on October 6, 1990, and have two minor children....
Christopher is an heir to the United Parcel Service fortune, and he possesses substantial separate property assets. During the marriage, neither Christopher nor Christine were employed. Christopher supported the family with earnings from his separate property investments, primarily stock dividends.

In 1996, after the birth of his daughter, Christopher consulted with and employed attorney Warren Sinsheimer to prepare an estate plan. Among other instruments, Sinsheimer drafted a revocable declaration of trust, entitled "The Starkman Family Revocable Trust." Christopher and Christine executed the 32-page Trust and related estate planning instruments on January 28, 1997. [129 Cal.App.4th 662]

Relevant Trust and General Assignment Provisions

Paragraph 1.01 of the Trust states that the parties settled the Trust "to simplify their affairs as well as update their estate plan and assure its efficient operation." It also provides that the Trust's purposes are "to avoid probate and provide for the orderly administration of the Settlors' property in the event of the death or incapacity of either Settlor."

Paragraph 2.02 states that the Settlors intend "to transfer all their assets to the Trust Estate, to the greatest possible extent."

The heart of this appeal is Trust Paragraph 2.03. It provides that the "Settlors agree that any property transferred by either of them to the Trust . . . is the community property of both of them unless such property is identified as the separate property of either Settlor...

Christopher later executed various stock brokerage transfer forms to convey specific assets into the Trust. Each form designates the assets to be held by Christopher and Christine as trustees of the Trust. The forms do not describe the assets as either community property or separate property.

Following the parties' separation, Christopher exercised his right to revoke the Trust, pursuant to its terms. Christine asserted that the assets that Christopher conveyed to the Trust by the stock brokerage forms, however, had been transmuted into community property.Starkman (2005) 129 Cal App 4th 659 at p. 661-663]

TEST FOR PROPER WRITING AS REQUIRED BY F.C. 852 (a):

FROM THE FACE OF THE AGREEMENT, WHAT IS THE PURPOSE OF THE AGREEMENT?

Is the primary purpose of the agreement to transmute the entirety of one party's separate property asset into community property, or into the separate property of the other party?

GUIDANCE FROM STARKMAN CASE:

The Trust's purposes are "to avoid probate and provide for the orderly administration of the Settlors' property in the event of the death or incapacity of either Settlor." The Trust also appears to concern and perhaps allow for income tax basis benefits for community property upon the death of a Settlor. (Int. Rev. Code, § 1014.) Its purpose is not an agreement between Christine and Christopher to transmute the entirety of Christopher's substantial separate property assets into community property. Neither the sentence in Paragraph 2.03 upon which Christine relies, nor the conveyance to the Trust effected by the General Assignment (conveyance of "any asset, whether real, personal, or mixed . . . now own[ed] or . . . own[ed] in the future" to the Trust), unambiguously establish that Christopher was effecting a change of ownership in the entirety of his significant separate estate. (Estate of MacDonald, supra, 51 Cal.3d 262, 271-272 [statement of general rule regarding proof of transmutation].) For example, the parties might have stated in Paragraph 2.03 that any property transferred to the Trust by either of them "becomes" or "is changed into" the community property of the parties. The Trust purposes set forth in Paragraph 1.01 might have included as a purpose that Christopher was transmuting the entirety of his separate estate to community property.

Moreover, other Trust provisions appear to support our interpretation. Paragraph 3.02, for example, requires the trustee to pay the net income of separate property to the contributing Settlor for his maintenance and support. In the event the net income is insufficient for those purposes, the trustee is required to invade "the principal of said Settlor's separate property." A reasonable inference from this language is that separate property retains its separate property characterization.
Starkman (2005) 129 Cal App 4th 659 at p. 664-665

EXTRINSIC EVIDENCE CAN NOT BE CONSIDERED IN DETERMING WHETHER AGREEMENT MEETS F.C. 852 (a) WRITING REQUIREMENT:

We do not consider the letter sent by attorney Sinsheimer warning "that separate property be clearly identified as such" as bearing upon any asserted transmutation. It is inadmissible extrinsic evidence. (Estate of MacDonald, supra, 51 Cal.3d 262, 271-272.) Moreover, the warning letter was sent to the parties nearly one month following Christopher's execution of the General Assignment which had already transferred to the Trust all property that he owned or would own in the future.
Starkman (2005) 129 Cal App 4th 659 at p. 665