Before understanding the importance of a transmutation agreement – and changing the classification of ownership – it is important to understand the difference between community and separate ownership. We generally know the term “marital arrangement.” These are essentially contracts that are executed before a couple is married. Did you know that after the wedding, you can also make a “post-uptial agreement”? A transmutation agreement is a kind of post-uptial agreement. It is essentially an agreement between the two spouses to change the status of a specific and determined property. Thus, while transmutation agreements are generally desirable from the point of view of wealth protection, they can have adverse tax consequences due to the loss of half the base levels up. This can be compensated by the fact that spouses can enter into a conversion contract at any time during the marriage. While spouses are working or practising their profession (and are at risk), they can therefore enter into a conversion agreement and transfer certain assets to the low-risk spouse. When the spouses retire and are at risk of settling, the spouses can enter into another processing contract and reintegrate their separated assets into the community, allowing them to recover the full step up. [Citation required] A transmutation contract is a marriage contract that provides that ownership of a given land is changed from the date of the agreement.
Spouses can implement joint ownership by agreement, partition or exchange them into separate properties. According to one authority, the separate property can be converted into co-ownership by an agreement between the spouses, but there is also an authority on the contrary. The most important tax aspect of a transmutation agreement is the effect it has on the basis of steps (or step-down) to death. If the spouses had kept the property separately in a common rent with a right of reversion, the surviving spouse would automatically receive half of the property by the original common rent title and not by inheritance or any other type of estate after death.