Show of hands, who has not heard of the McCourt divorce case? If you live in Los Angeles there is barely any other news coverage. While public divorces of the rich have always made great fodder for gossip journalists, this divorce sheds some light on a frequently used, but infrequently discussed, asset protection technique.
In community property states like California, assets that are deemed community property can be reached by creditors of either spouse. Whenever we have a client that is married and has a creditor problem, we will always consider making some community property assets the separate property of the other spouse. This is commonly accomplished through a form of a post-nuptial agreement known as the transmutation agreement (more on those below).