The Community Property Agreement

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I’m Beau Ruff. If you’re married in Washington state, I want to tell you why you should consider the Community property agreement. Property owned by a spouse does not automatically transfer to the surviving spouse at death. Instead, something more is needed in the estate plan to accomplish this feat.
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In all, the complexity of the estate plan, the Community property agreement is 1 document in particular that offers simplicity and yet is still a powerful component to an estate plan. It can be drafted on a single page and contain fewer words than the words I’m speaking in this video, and it provides, in my opinion, the simplest most cost effective and most powerful method to transfer assets between spouses at death.
00:00:49
But Washington is a community property state, so why do I need a community property agreement? That’s a great question. The fact that Washington is a community property state carries with it a specific meaning. It means, generally, that all property acquired during marriage is Community property and its own 1/2 by each spouse.
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All property acquired either before marriage or during marriage, but by gift or inheritance, maintains its character as separate property. That’s all it means when we say, colloquially, that Washington is a community property state.
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It’s a statement as to the character or nature of the property acquired by a married couple. It does not mean that the surviving spouse has an interest in all the property, and it does not mean that the surviving spouse is automatically entitled to the property at the death of the first spouse, and it does not mean that the property vests in the surviving spouse. Automatically, the law requires something more to accomplish all this. The concept of Community property comes from Spanish civil law, and that’s relatively unique in the United States. Just nine of the 50 states are so-called Community property states. It’s Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin. Most of those states are located in the western United States.
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Where the law was established, likely for a couple of reasons. First, it was likely an enticement for the female population to relocate to those states, lured by the promise of joint ownership of assets.
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Second, it was likely established out West because those states that included Community property concepts in their constitutions adopted their constitutions later than Eastern states, and during a time that women’s rights were advancing nationally.
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The Community property agreement is an agreement between spouses that they enter into concerning the character and disposition of Community property. It’s specifically authorized under Washington law, and it typically adds 2 important prongs to the general Community property law concepts that I explored earlier.
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It provides that the parties, the spouses, agree that all property acquired at any time be treated as Community property. So even though a portion of the couples’ property may have been acquired before marriage or by gift or inheritance, and therefore not technically Community property, the couple is agreeing that it shall nonetheless become Community property and character.
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So the first prong changes all property, whether separate or community, into community property. The second prong says that at the death of the first spouse, all Community property shall automatically vest in the surviving spouse.
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The Community property agreement provides the means to accomplish what most people understand. The basic Community property laws to provide the vesting of all property in the surviving spouse upon death.
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The Community property agreement is not right for everyone. It does not work well for couples that have an estate subject to the estate tax, which is roughly $2.2 million for 2023. But it also doesn’t work well if the couple is planning on implementing specific creditor protection strategies in the estate plan, and because it necessarily gives all assets to the surviving spouse, it doesn’t work well where the plan is to not give all assets to the surviving spouse, for example, where a person has specific gifts outlined to children.
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Or where the couple has a blended family. Think second marriages with his and hers and ours, and they wish to preserve the interests of the biological children in their inheritance. Then the Community property agreement may not work best, but for the average couple that simply wants all assets to go to the survivor, the Community property agreement could be the best way to transfer assets.
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Of course, it’s always best to seek the advice of a skilled estate planning attorney to figure out what works best with your unique set of facts. But don’t feel put off by the complexity of the estate planning documents or the estate planning process. It’s important to have the estate plan in place and it need not be an arduous process, especially if the Community property agreement is included.