Community property: does changing title change ownership?

November 21, 2013, by

couple signing papers.jpgProperty brought into a marriage is separate property. It sometimes happens that a married person wants to borrow against his or her separate real estate, and the title is put in both spouses' names in the refinancing. This might be done so the bank can more easily pursue its remedies if the loan isn't paid. Does the change in title make the separate real estate into community property?

The Borghi case decided by the Washington Supreme Court in 2009 isn't exactly like that, but it goes a long way toward answering the question. Jeannette had bought property on a contract in 1966. In 1975, two things happened. First, she got married to Robert. Second, she got clear title to the property, meaning it had been paid off. For some reason, the development company that had sold her the property issued the clear-title deed in the names of both spouses. It wasn't recorded until 1979, when they borrowed against the property.

Jeannette then died in 2005. She didn't have a Will, so under Washington law her community property was to go to her husband, and her separate property would be divided equally between husband Robert and son Arthur by previous marriage. The trial court, seeing the title in both spouses' names, declared it community property.

Arthur appealed the case. His position was that, because his mother had bought the property before she married Robert, it was her separate property despite the joint titling. How did the case come out? We'll discuss the answer next week.