What contract would I need to limit my wifes liability to communal property in California?

My mother’s house is facing foreclosure and my mother wants to either transfer the house to me or sell me the house. However, my wife wants no part of this house or the debt that could be associated with it. I have spoken to 2 loan officers who told me that my wifes dilemma could be solved with a quitclaim contract and a non-recourse loan. On the

other hand, my wife spoke to an attorney who said that she would need to file a legal separation from me in order to be free of liability. Who is correct?

Asked on September 8, 2018 under Real Estate Law, California

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 2 years ago | Contributor

Not surprisingly, the attorney is more correct, though he/she possibly oversimplified. CA is a community property state. If you take ownership of the house, but your wife does not (she is not on the title; she is not an owner), then what happens is:
1) You are personally liable or responsible for any debts associated with the property you acquired.
2) Your wife is not personally liable for them, as a non-owner, and her "separate property"--anything she owned pre-marriage; anything inherited solely by her or gifted solely to her--is not something house-related creditors can reach.
3) But all community property could be attached or reached by creditors--so any other real estate the two of you own; vehicles the two of you own; money in a joint bank account or joint investments; etc. The fact that she is not personally liable does not mean that she could not face the loss of alot of the money and assets acquired and built up during marriage, if house creditors take action. You and she would have to legally separate or divorce to avoid this.
Also, you do realize that your mother cannot transfer the home without paying off the mortgage, correct? She cannot impair or negate the lender's rights, such as the right to foreclose. If she does transfer the house without paying the mortgage, the house can be foreclosed and taken from you or from whomever buys or acquires it.


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