A transmutation is a change in the character of property, such (a) as from community property of both spouses to the separate property of one spouse, (b) from the separate property of one spouse to the community property of the other, or (c) from the separate property of one spouse to the separate property of the other spouse.
In really direct terms: Transmutation means you are giving up your interest in property or obtaining an interest in property.
For example, if you own a house from before you married and, during the marriage, you add your spouse on title, you just gave your spouse a one-half interest in the house (there are some reimbursement rights that can protect you up to the equity that existed at the time you signed the deed).
It matters in a divorce case because who owns property and whether property is community or separate affects who gets what in the divorce.
Frequently, there are trials over whether a transmutation should be set aside (undone as if it never happened). Essentially, to set aside or get out of a transmutation, one has to prove that the transmutation was the result of a breach of fiduciary duty by the spouse who benefited from the transaction and that this spouse received an unfair advantage.
See my next blog when I talk about fiduciary duties. I will do a Part One specific to transmutations and then a Part Two on fiduciary duties in general.