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No Will? Part VI: How Does Community Property Come into Play?

By June 14, 2016 No Comments

Jayson on Flickr

This blog series explores the problems and complexities that may occur when someone dies without a Will. Prior posts discussed the process for appointing an estate Administrator, the authority that an Administrator may or may not have, whether the Administrator may be required by the court to furnish bond, and an overview of intestate succession. In my fifth blog post, I discussed the details of intestate succession in terms of the distribution to a surviving spouse or registered domestic partner. This blog post expands on this topic.

As noted in my previous blog post, in order to determine what a surviving spouse or registered domestic partner receives pursuant to intestate succession, proper identification of community property versus separate property is needed. But that’s easy, right? If you’re married, isn’t everything community property? Well, not so fast.  I note that the most recent update to my Community Property Deskbook is 722 pages long. If community property is so easy, why does it take 722 pages to analyze it?

Community property issues can actually be quite complicated. For example, suppose a spouse received an inheritance, which is considered separate property, but he deposited those funds into a joint checking account in which funds are continually going in and out?[i] After a time, the inheritance becomes co-mingled with the community funds, so that it loses its character as separate property.  Or, suppose a spouse brought significant separate property assets into the marriage, and little community property has been accumulated because the marriage has only lasted for three years?  Is the spouse who came into the marriage with fewer assets simply out of luck with no Will? Or suppose a spouse runs a business, which she had prior to the marriage, but both spouses work in the business after the marriage and it substantially increases in value? Is the business still the original owner’s separate property? Or, has the spouse who contributed to it post-marriage entitled to a share of the increased value?

A multitude of scenarios, common in daily life, can muddy the waters in the determination of community versus separate property. Having a marital agreement in place, commonly referred to as a “pre-nup,” certainly helps, but it’s not a bulletproof solution. And, when heirs have a financial stake in proving that the assets are either community or separate, the costs of litigating these issues can quickly ratchet up.

The solution? Both spouses should seek representation, discuss community property issues with their attorney, and develop solid estate planning documents. With proper planning, reflected by Wills and also potentially by a marital agreement and/or a Revocable Living Trust, the chances of having your heirs engage in World War III tactics in arguing over the identification of property as community versus separate will be greatly diminished.

[i] Although I refer to “spouses” in this analysis, the analysis equally applies to Washington registered domestic partners.

Read the next post in the series here.

Photo credit: Jayson on Flickr

This post is for informational purposes and does not contain or convey legal advice. The information herein should not be used or relied upon in regard to any particular facts or circumstances without first consulting with an attorney.

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