Beyond Bending Tell You How
If you are married or planning to get married in Washington State, it is important to understand the concept of community property and how it affects your property rights. Washington is one of nine states that follow the community property system, which means that all assets acquired by a married couple during their marriage are considered community property and are owned equally by both spouses.
However, Washington also allows couples to opt out of the default community property system by signing a community property agreement. In this article, we will take a closer look at what a community property agreement is, how it works, and why it is important to have one.
What is a Community Property Agreement?
A community property agreement (CPA) is a legal contract between spouses that allows them to modify the default rules of community property in Washington State. By signing a CPA, couples can agree to treat their property as separate rather than community property.
According to the Washington State Bar Association, a CPA is a “written agreement between husband and wife, which provides that all property, wherever situated, acquired by either spouse subsequent to the execution of the agreement is the separate property of the acquiring spouse.”
When a couple signs a CPA, they are essentially agreeing to divide their property in a way that is different from the default rules of community property. The agreement can cover all or some of the property owned by the couple, and can be tailored to meet their specific needs and circumstances.
How Does a Community Property Agreement Work?
In Washington State, a CPA must be in writing and signed by both spouses in the presence of a notary public. The agreement must be filed with the county auditor’s office where the couple resides or where the property is located.
Once a CPA is signed and filed, the property owned by each spouse is considered separate property rather than community property. This means that each spouse has the right to manage, control, and dispose of their separate property as they see fit, without the other spouse’s consent.
In the event of a divorce or death, the CPA will govern how the property is divided between the spouses or their heirs. If the couple did not have a CPA, the default rules of community property would apply, and the property would be divided equally between the spouses.
Why is a Community Property Agreement Important?
There are several reasons why a community property agreement may be important for couples in Washington State:
1. Flexibility
A CPA allows couples to design their own property division plan that works best for their specific needs and circumstances. This can be especially important for couples who have children from previous marriages, own businesses, or have significant assets that they want to keep separate.
2. Protection
By converting community property to separate property, a CPA can provide additional protection for each spouse’s assets. This can be especially important in the event of a divorce or death, as it can help ensure that each spouse’s assets are distributed according to their wishes.
3. Tax Benefits
A CPA can also provide tax benefits for couples. For example, if one spouse has significant debt, a CPA can help protect the other spouse’s assets from creditors. Additionally, if one spouse has a higher income, a CPA can help reduce the couple’s overall tax liability by allowing each spouse to claim their separate property on their tax returns.
Community Property vs. Separate Property
Before deciding whether a community property agreement is right for you, it is important to understand the differences between community property and separate property.
Community property is any property that is acquired by a married couple during their marriage. This includes:
- Income earned by either spouse
- Property purchased with community funds
- Debts incurred during the marriage
Separate property, on the other hand, is property that is owned by only one spouse. This includes:
- Property owned by one spouse prior to the marriage
- Property acquired by one spouse during the marriage by gift or inheritance
- Property purchased with separate funds
It is important to note that separate property can become community property if it is commingled with community property. For example, if one spouse uses their separate funds to make a down payment on a house that is later paid off with community funds, the house may be considered community property.
Pros and Cons of a Community Property Agreement
Like any legal agreement, a community property agreement has both pros and cons. Here are some of the main advantages and disadvantages to consider:
Pros
- Flexibility to design a property division plan that works best for your needs
- Protection for each spouse’s assets
- Tax benefits
- Can help avoid disputes and litigation in the event of divorce or death
Cons
- Can be complex and difficult to understand
- May require the assistance of an attorney
- May not be appropriate for all couples or situations
- Can be difficult to modify or revoke once signed
How to Create a Community Property Agreement
If you are considering a community property agreement, it is important to consult with an experienced family law attorney who can help you draft a legally binding agreement that meets your needs and protects your interests.
Here are some steps you can take to create a community property agreement:
- Consult with an attorney. A family law attorney can help you understand the legal implications of a community property agreement and guide you through the process of creating one.
- Identify your separate property. Make a list of all property that you want to designate as separate property in the agreement.
- Determine how you want to divide your community property. Decide how you want to divide any community property that you and your spouse own, taking into account your individual needs and circumstances.
- Get your agreement in writing. Your agreement must be in writing and signed by both spouses in the presence of a notary public.
- File your agreement. Your agreement must be filed with the county auditor’s office where you reside or where the property is located.
FAQs
Here are some commonly asked questions about community property agreements in Washington State:
Q: Can we modify or revoke our community property agreement?
A: Yes, a community property agreement can be modified or revoked by written agreement of both spouses. However, any modification or revocation must be in writing and signed by both spouses in the presence of a notary public, and must be filed with the county auditor’s office.
Q: Can we create a community property agreement after we are married?
A: Yes, a community property agreement can be created at any time during a marriage.
Q: Do we need an attorney to create a community property agreement?
A: While it is not required by law, it is highly recommended that you consult with an experienced family law attorney to help you create a legally binding agreement that meets your needs and protects your interests.
Q: Can a community property agreement be challenged in court?
A: Yes, a community property agreement can be challenged in court, but the burden of proof is on the party challenging the agreement. The court will only invalidate the agreement if it finds that it was not entered into voluntarily or that it is unconscionable.
Conclusion
A community property agreement can be an important tool for couples in Washington State who want to modify the default rules of community property and protect their assets. If you are considering a CPA, it is important to consult with an experienced family law attorney who can help you create a legally binding agreement that meets your needs and protects your interests.
