Recently in Community property and separate property Category

We have common-law marriage, right?

February 13, 2014, by

People tend to throw around the term "common-law marriage" to refer to couples who have lived together for a long time. The implication is that by living together, without getting the legal document, the spouses have acquired some rights in each other's property.

Washington does not have common law marriage. Here, you're not married unless you get the document. But courts do recognize long-term relationships. The Washington Supreme Court has said that when a relationship qualifies, and the couple splits up or one dies, the court should make a "just and equitable" distribution of property between the parties. The reasoning is that the two people living together will take care of each other's things, buy assets together, and support each other in various ways. If this goes on long enough, they acquire a partial ownership in each other's property.

So what sort of relationship qualifies? The Supreme Court has said they look at a number of factors, but the most important factor is that the parties lived together. Other factors include:

  • Continuous cohabitation
  • Duration of the relationship
  • Purpose of the relationship
  • Pooling of resources for joint projects
  • The parties' intent.

Establishing these factors and determining a fair and equitable distribution of property can be a long, painful process potentially involving lots of legal fees and possibly even a trial. Couples in this type of relationship should think about avoiding the pain by planning ahead. A cohabitation agreement, for example, describes property rights, duties and financial support, similar to a prenuptial agreement. Careful estate planning, too, can forestall after-death stress by recognizing each other's contributions to the relationship. For example, a couple in a long-term relationship may decide to execute Wills giving everything to each other, the way spouses would. Or, they might give each other significant gifts that would both recognize the relationship and make it financially disadvantageous to challenge the Will. (No, we're not going to tell you to get married. Unless you want to.)

So what is this non-married relationship called? The Washington Supreme Court in 2007 chose a new name for it: Committed Intimate Relationship, or CIR. Previously they were called "meretricious" relationships. The Court rejected the word "meretricious" for its negative connotation. In fact in 1989 the Court condemned the word "meretricious" for being "offensive, demeaning and sexist" because it is based in a word meaning "prostitute."

By the way, this is different from a State Registered Domestic Partnership. Registered DPs have many of the same rights as married couples. But note that, starting this summer, DPs will only be available to couples where one partner is 62 or older.

Community property, separate property, and the benefit of trusts (2 of 2).

December 26, 2013, by

two stacks of coins.pngDid Donna get to keep her separate stock in her divorce, or had she made it community and thus divisible between her and Kelly? Interestingly, the Court of Appeals didn't find it critical whether the shares were separate or community.

The key question in allocating separate as well as community property in a divorce in Washington, is what is fair, without consideration of fault in the divorce. The Court of Appeals was satisfied that the trial court was striving for fairness in making the division, so it didn't matter whether the stock was community or separate. It also discarded Donna's argument she should have had her own lawyer to make an effective community property agreement, declaring this more important in a comprehensive premarital agreement that in a postnuptial one focusing on a single asset.

Continue reading "Community property, separate property, and the benefit of trusts (2 of 2). " »

Community property, separate property, and the benefit of trusts (1 of 2).

December 19, 2013, by

stock certificate 2.jpgDonna and Kelly got married in 1986. Donna's parents had a successful business and gave stock to her. Because she received it in this way, the stock was her separate property despite the marriage. After a while Donna and Kelly became aware of certain tax advantages in agreeing that the shares should be community property instead. This they did, despite another document signed by all the company's owners that required a two-thirds vote to authorize any transfer of the shares.

The couple separated in 2002 and Donna filed to dissolve their marriage. She argued that the shareholders' agreement trumped their community property agreement and made ineffective their attempted change of the stock to community.

Continue reading "Community property, separate property, and the benefit of trusts (1 of 2). " »

Committed intimate relationships: the guy gets it wrong again.

December 12, 2013, by

marijuana.jpgRebecca moved in with Gary. He owned the house, in Arlington, Washington. She wanted to grow marijuana. He added walls and installed grow lights in his detached garage. She did the gardening.

Whether this would or would not have been legal now in Washington, it wasn't then. They got caught. Gary was charged along with Rebecca, in his case as one who "make(s) available" his house for producing a controlled substance.

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Do two become as one? Jewelry and community property.

December 5, 2013, by

jewelry.jpgA criminal case, of all things, reminds us of the treatment of jewelry under Washington community property law. Gerardo was convicted of burglarizing the Kraut residence and stealing the husband's firearms and the wife's jewelry. He appealed his sentence because his offender score was calculated in a way that treated Mr. and Mrs. Kraut as two victims. Thus this burglary was deemed two offenses.

Gerardo argued, with some justification if someone who breaks into others' homes may be justified, that what he stole was community property. In his and his attorneys' eyes, the Krauts upon marrying had become one, later to be one victim.

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Community property: does changing title change ownership? (2 of 2)

November 28, 2013, by

property.jpgThis is a continuation of last week's blog. Son Arthur prevailed in the Court of Appeals, with his argument that the real estate his mom had bought before her marriage to Robert was separate property. Thus in her estate it would be divided equally between Arthur and Robert. Robert then took the case further, to the Washington Supreme Court. How did it rule?

Robert relied on an earlier reported case finding joint title to be indicative of community property. This caused the Supreme Court to examine its presumptions. It is pretty well settled in the law that property acquired before the marriage is separate property and remains so until clearly made community. The earlier case Robert was relying upon, confused that presumption.

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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.

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Asset protection for Bernie (cont'd), and separate property.

November 22, 2012, by

TE BLOG. Scales of justice. 11.2012.iStock_000015782295XSmall[1].jpg
Lars's meeting with Duncan and Bernie resumes. Duncan says the effect of a married couple's liabilities on their community and separate property is a little tricky, but it's important in cases where the question arises. He gives an illustration. A woman from a wealthy family marries a guy who's a budding obstetrician. If she allows her separate property to become community property, either by agreement or by commingling, and a medical malpractice case arises against her husband, then her property is exposed to the case. If she keeps it segregated and makes no community property agreement, the claimant may not get at it.

Duncan lines out part of the theory. The income of a married person from work is community property. The idea is a married couple is like a partnership, with each performing a different part of the work, but with both contributing to the overall effort. So the income from work is community, but so are the liabilities. Not so with the wife's separate property. If the assets from her family were in trust for her, that would likely be even better protected than separate property.

Continue reading "Asset protection for Bernie (cont'd), and separate property. " »

Uncle Nils's premarital agreement (cont'd)

November 3, 2011, by

TE BLOG. Wedding band rings on prenup doc. 10.25.2011.iStock_000016388032Medium[1].jpg
The prenup Lars helped arrange for Uncle Nils, was more properly done and more complete than Carla Dewberry's.

Premarital agreements are commonly viewed as tools of deprivation and exploitation. Prenups are perhaps most common in later-in-life marriages, and the parties are likely to differ in wealth. Does the rich old guy secure the younger and poorer woman at a bargain, leaving her with little after she looks after him for years? Sometimes. But an agreement can be a useful form of communication, resolving important practical questions that might otherwise go unasked. Is Sylvia promised any financial reward? How much, and in what scenarios?

The answers aren't always miserly. Many lawyers recommend a degree of generosity. This is partly because a stingy arrangement is more likely to be found invalid in a later divorce. But there's also the factor that it's a marriage being talked about, not a sale of property between unrelated persons. Nils has no kids and has plenty of money. Why not make a nice gesture to the woman he's marrying?

Nils and Sylvia's document was drafted by his attorney, then reviewed by hers with her. It was done months in advance of the wedding, as a last-minute deal is breakable, implying the possibility of duress. His separate property remains that way. But she gets the house and a $2 million trust out of it if they divorce after at least three years, or if Nils dies before her.

This is what Nils has agreed at the outset, that he must do for Sylvia in those events. He might be a little worried she is more interested in his money than in him, although she does seem genuine. If things go well he can be even more generous; their agreement certainly doesn't prevent that.

Surprising things happen sometimes, with women and men...

Marriage of Dewberry: don't do your prenup this way.

October 27, 2011, by

TE BLOG. Wedding couple and money coins.10.25.2011.iStock_000015774569Medium[1].jpgEmanuel thought ahead and got burned. Carla was careless (or at least carefree) and got away with it. Why?

Budding music executive Emanuel insisted on certain conditions to marry recent law graduate Carla, who was then working in a big CPA firm. They must keep their incomes and assets separated, and Carla would not get fat (!). The Marriage of Dewberry, decided in 2003 by the Washington Court of Appeals, leaves us wondering about fulfillment of the second condition, but Carla did get fat on the first.

It turned out she was the one who needed a premarital agreement, not Emanuel. His music career foundered, and he ended up working part time for United Parcel. She became a partner in a Seattle law firm, making over $1 million in 2000. [Editor's note: this is not a typical income for a lawyer.] They invested separately, mostly in real estate, although they did have a joint account for expenses of their kids and other shared items.

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It doesn't hurt that Lars has a rich and childless Uncle Nils.

October 20, 2011, by

TE BLOG. Bride and groom. 08.23.2011.iStock_000003319084Medium[1].jpgNils isn't the main reason things are pretty good for Lars. But it doesn't hurt.

Nils had been a lifelong bachelor, mostly obsessed with accumulating real estate, initially in the grocery business but eventually as a thing in itself. He's now worth millions, and not just a few of them.

Lars is Nils's CPA, and helps to keep track of the real estate holdings and their management, more so as the years go by. Nils is in his eighties.

Lars tries not to think of it this way, but it's convenient that Lars is childless. It's less convenient that Uncle Nils is recently married.

Continue reading "It doesn't hurt that Lars has a rich and childless Uncle Nils. " »

Francom v. Costco: how to sink a family.

October 13, 2011, by

TE BLOG. Moving day boxes. 08.23.2011.iStock_000008388519Medium[1].jpgGary and his employer Costco were both sued by Kim for sexual harassment of her. Gary's wife Sherry was also sued, not for participation in the alleged acts but to make Gary and Sherry's community property available to satisfy the claim.

Community property is net worth developed during the marriage by the work of either or both of the spouses. The idea is that, even if only one spouse is working for money, he or she couldn't do it without the support of the other. Separate property is what is brought into the marriage, or gotten by gift or inheritance while married. Separate property may be made into community property by commingling (mixing together with community property) or by agreement.

Kim sued Gary and Sherry's community on the notion the harassment occurred at work, where Gary was working to gain community income. Did the Court make Gary and Sherry's community property available to the suit?

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