Community property is a term used to identify a married couple's assets. However, when a couple gets married, all property does not automatically become community property. Spouses are still able to keep separate property. This can change if the married couple chooses to enter into a community property agreement.
What is the purpose of a community property agreement?
The purpose of a community property agreement is to turn all presently-owned property into community property. Further, all future property acquired by either spouse will classified as community property as well. RCW 26.16.120.
What does this mean? This means that when one of the spouses die, the surviving spouse will inherit the deceased spouse's share of the community property. This also means that the surviving spouse can often avoid probate for the deceased spouse's estate. The surviving spouse can use the community property agreement to transfer any of the decedent's accounts and other property in the surviving spouse's name.
A community property agreement may seem simple on its face, but it is powerful. A community property agreement overrides a last will and testament and other beneficiary designations as well. For example, a community property agreement will override a joint tenancy with right of survivorship.
What are the pros and cons of a community property agreement?
A community property agreement can be helpful for married couples who are not facing potential estate tax concerns. Additionally, a community property agreement can be helpful for those who would like the surviving spouse to inherit everything and anything. Further, when planned carefully, a community property agreement can eliminate the need for probate upon the death of the first spouse.
However, a community property agreement can complicate or expose an estate to estate taxes. Further, if either spouse owns property in another state that is not a community property state, the agreement may not be recognized in that jurisdiction. This could create the need for a probate in that state. Lastly, if either spouse has an interest or owns property with a third party, a community property agreement can have unintended consequences pertaining to transfer of those interests.
In conclusion, a community property agreement is a powerful estate planning document and warrants a great deal of consideration. Schedule a consultation to see whether you could benefit from having one in place.
Disclaimer: The purpose of this post is to provide general information and a general understanding of the law, not to provide specific legal advice. By accessing this blog site you understand that there is no attorney-client relationship between you and Sekhon Law, PLLC. This post should not be used as a substitute for competent legal advice from a licensed professional attorney in your state.