What is Community Property?
Generally, under Washington state law, community property is all property acquired by a husband or wife after marriage. A husband and wife are each considered as owning one-half of the couple’s community property. A marital partner’s Last Will and Testament transfers his or her one-half share of the couple’s community property, along with interests in all of his or her separate property.
What is Separate Property?
Washington law provides that property acquired by an individual prior to marriage, including the right to receive payments on the property or to receive proceeds from the sale of the property, is the separate property of the individual. Property acquired after the marriage by gift, bequest, devise, descent, or inheritance, along with the rents, issues, and profits from this property, is also the separate property of a married individual.
Can Separate Property be Converted to Community Property? Separate property can be converted to community property by a formal “gift” of separate property to the marital community or by commingling separate property with community property. For example, if Joe and Sue are married, and if Joe receives a gift of $100,000 from his father, the $100,000 is Joe’s separate property. But if Joe puts the $100,000 into a bank account in both his and Sue’s names, he has commingled the $100,000, which would convert it to community property.
What is a Community Property Agreement?
Washington law allows a married couple to enter into an agreement defining the character of the property owned by them. This includes the ability to enter into an agreement that upon the death of the first spouse to die all of the property owned by them will be treated as community property, and will automatically pass to the surviving spouse.
What is the Effect of a Community Property Agreement Upon Death of a Spouse?
A community property agreement that converts all of a couple’s property to community property, and passes it to the survivor of them upon the death of the first to die, results in all the couple’s property passing to the survivor of them upon the death of the first spouse to die. This avoids having to go through the court process of probate in order to pass the deceased spouse’s one-half share of the couple’s community property and any separate property to the surviving spouse. Community property agreements are an inexpensive way to avoid probate.
When Would a Community Property Agreement be Undesirable?
A community property agreement passing all of a couple’s property to the survivor of them is not always a good idea. For example, if the value of a couple’s combined community property and separate property exceeds $2 million, using a community property agreement to pass all assets to the surviving spouse upon the death of the first could subject the estate of the survivor to unnecessary Washington estate tax. A community property agreement is rarely desired by spouses in a second marriage when there are children from a prior marriage. A spouse with children from a prior marriage may desire to pass at least some property to his or her children from a prior marriage, or some other person other than the surviving spouse, upon death. Also, a community property agreement would not be advisable if a person wants to leave a gift to a charitable organization at the time of his or her passing.