Medicaid Attorney
in Washington
(360) 816-2485
WHEN SHOULDN'T YOU SIGN A COMMUNITY PROPERTY AGREEMENT?
By Liz Perry
When you sign a Washington Community Property Agreement, there are three things that the common Community Property Agreement says. Those three things are:
1) On the day you and your spouse sign the agreement, you and your spouse will own everything either of you own at the time equally (i.e., half and half).
2) In the future, anything either you or your spouse receives from any source (i.e., gift, inheritance, work, etc.) will be owned half and half by both of you.
3) When the first spouse dies everything will go automatically, without a probate, to whichever spouse survives.
The appeal of signing a Community Property Agreement is the automatic transfer to the surviving spouse on the death of the first spouse. That means the surviving spouse can avoid a probate.
So a good question is, "When are some of the times a couple should go slow and think things through before signing a three-part Community Property Agreement”?
An obvious situation is when you have an estate larger than the amount that can pass free of death tax. If your combined estate is greater than $2 million (which is the current amount that can pass free of Washington inheritance tax), you should consider whether more complex estate planning, which will reduce or eliminate inheritance tax, is more appropriate for you and your spouse.
If you and your spouse are in your late 60's or beyond and are worried about your assets being wiped out by the costs of long-term care for the surviving spouse, you will want to carefully consider whether you and your spouse should have a Will with a Special Needs Testamentary Trust, rather than a Community Property Agreement.
Another instance that requires going slow and thinking things through is when you have not been married very long and one of you owned a lot of assets before you got married. If you sign a contract that says everything is owned equally and then the marriage does not last, there is a good chance the judge will divide assets differently than if you had not signed an agreement saying you own everything equally. This could be very detrimental to the spouse who owned more assets before the marriage.
The part of the typical Community Property Agreement that says "everything obtained in the future will be owned equally” can be a problem if one spouse gets a large inheritance and later the marriage ends. Again, in a divorce, the judge is likely to divide the couple's assets differently than the judge would if the couple had not signed the Community Property Agreement.
An additional time you should go slow in signing a Community Property Agreement is when either or both of you have children from a prior marriage. You need to ask yourself, "How important is it to you, if you die first, that when your spouse dies that your half of what you own goes to your kids, rather than your spouse's kids or your spouse's new spouse”? If it is very important, you should consider the use of a trust, rather than a Community Property Agreement.
You should be aware that you may sign a Community Property Agreement that has only one or two of the three parts listed above, rather than all three parts. Remember, one size does not fit all. What is right for you depends on your situation and your goals. Hopefully, the above discussion alerts you to some instances where you should carefully consider all the pros and cons. I would be happy to meet with you to analyze your goals so that you and your family will have the best protection.
(The above should not be construed as specific legal advice and is intended for general information purposes only.)
I have been helping Clark County residents with their estate planning and probate needs since 1976. I give frequent seminars in the community to help increase understanding of estate planning issues. My practice emphasizes probate, Medicaid issues, wills, trusts, incapacity issues, guardianships and durable powers of attorney. Phone: (360) 816-2485 Fax: (360) 816-2486 |
