[WSBAPT] Community Prop. Agmt with unequal disposition
Sam Furgason
sam at furgasons.com
Mon Aug 4 12:35:15 PDT 2014
OK, I’ll give it a shot.
The “traditional 3-prong” community property agreement was quite simple.
With some variation in language, it went, “[1st ‘prong’] Everything we now
own, and [2nd ‘prong’] everything we may acquire, we declare to be the
community property of both of us. [3rd ‘prong’] Upon the death of either
of us, all community property shall vest in the survivor of us.” Language
varies, but that is the essence. The third prong was based on the statute,
the rest on the ability to give property to each other. The agreement was
used most often where there was a single marriage, there was no way to
avoid probate to establish ownership of community real property, and the
CPA was a cheap solution for avoiding probate. Oh, and most people didn’t
have much of anything of value except real property. (Some people may also
have liked it because it was a contract which, unlike a will, couldn’t be
changed without both parties’ consent.)
Nowadays, many CPAs include, for example, time delimited survivorship
provisions [to avoid all property being in one estate in the case of
near-simultaneous deaths, or for tax reasons], the ability to revoke upon
the incapacity of one party [to qualify the incapacitated party for
governmental aid, for example], the automatic revocation upon the filing
of a petition for dissolution or separation by or on behalf of either
party [to avoid the Bachmeier* situation, where the wife changed her will,
but died during the divorce proceedings, and her estranged second husband
took everything while her child received nothing], and other conditional
provisions.
As things get more complex, title companies don’t want to be put into the
position of having to determine whether all preconditions to vesting of
title have been met. (For example, if two parties file, then dismiss, a
petition for legal separation in Nevada, the agreement is void, a fact
which may not be evident at the time of death.) Those are provisions with
which I am acquainted, but the point is that when there are numerous
“ifs,” “ands,” or “buts” in a lengthy agreement, and the “standard”
language (that which has passed muster for decades) is modified, then the
title insurance company has to consult with legal counsel before issuing
the policy, who has to determine whether an affidavit by the surviving
spouse, affirming that all conditions have been satisfied, is adequate.
With multiple marriages and children from different spouses, who’s to say
that a surviving spouse would not dishonestly claim that all preconditions
to validity have been satisfied to avoid a property interest passing to a
stepchild, then disappearing with the cash from a sale before the
stepchild steps in and files suit, claiming the CPA was void because of
some voiding event having taken place? The title company is then put to
the burden of defending the title, with its remedy in the event of a loss
being to chase the surviving spouse for the money. Why take a chance on
that aggravation?
These are issues of practicality, not necessarily legality. But transfer
of title to real property in Washington is difficult if title insurance
companies are not willing to insure title, or will do so only upon payment
of a much higher premium arising from the increased risk and research to
assure that they will not be defending some issue down the road. While my
use of the word “useless” may not have been the best choice, I can see
where as a practical matter the costs to get title insured using a complex
agreement of several pages in length could reduce its usefulness.
The question before us in this thread is an example of when the CPA cannot
be used to transfer title to a surviving spouse, and where a probate would
be necessary: the provision says that the estate of first spouse to die
will receive either 45% or 55%. Not the children or some other person, but
the estate. So the only way I can see to determine the owner(s) of that
interest is to probate that first decedent’s estate. A title insurance
company will want to have a deed of distribution signed by a PR and filed
of record to establish the chain of title.
Of course nowadays we have many legal developments that did not exist when
the simpler CPAs were available: TOD deeds, the Bachmeier decision, aid to
the medically needy, revocable living trusts, family limited partnerships,
etc.
That’s the way I see that the CPA could lose its usefulness for nonprobate
transfer of title to real property, at least as a practical matter. Please
remember I am only one opinion among many, and the law is always exactly
what the Supreme Court says it is.
S
· *In re Estate of Bachmeier, 52 P.3d 22, 147 Wn.2d 60 (Wash.
2002)
· Supreme Court of Washington
· August 8, 2002
· 52 P.3d 22
· 147 Wn.2d 60
From: wsbapt-owner at lists.wsbarppt.com
[mailto:wsbapt-owner at lists.wsbarppt.com] On Behalf Of James B. Dolan
Sent: Saturday, August 02, 2014 9:18 AM
To: wsbapt at lists.wsbarppt.com
Subject: RE: [WSBAPT] Community Prop. Agmt with unequal disposition
Sam:
Can you please further explain your potential third problem:
“A third problem can arise from complexity, because the agreement can
become useless for the transfer of title to real property.”
I have used (1) CPA plus (2) certificate of death plus (3) affidavit of
surviving spouse to “clear” a deceased spouse’s name from title. This has
passed muster with title companies in subsequent conveyances of that
property.
I am interested in your comment – not arguing, just curious as to what
problems you foresee.
Thanks,
Jim Dolan
Jones Butler Dolan, PS
P.O. Box 2784
720 South Main Street
Suite 233
Mount Vernon, WA 98273
Telephone: 360-336-2939
Facsimile: 360-336-2949
E-Mail: jbdolan at jbdolan.com
From: wsbapt-owner at lists.wsbarppt.com
[mailto:wsbapt-owner at lists.wsbarppt.com] On Behalf Of Goffe, Wendy S.
Sent: Saturday, August 02, 2014 7:36 AM
To: wsbapt at lists.wsbarppt.com
Subject: RE: [WSBAPT] Community Prop. Agmt with unequal disposition
Harry Cross’s UW Law Review article is still the best at explaining the
origins of the agreement and the prongs.
Wendy S. Goffe, Partner
STOEL RIVES LLP Direct: (206) 386-7565
wsgoffe at stoel.com | www.stoel.com <http://www.stoel.com/>
Click here <http://www.stoel.com/showbio.aspx?Show=9346> to view my
online bio
From: wsbapt-owner at lists.wsbarppt.com
[mailto:wsbapt-owner at lists.wsbarppt.com] On Behalf Of Sam Furgason
Sent: Friday, August 01, 2014 2:13 PM
To: wsbapt at lists.wsbarppt.com
Subject: RE: [WSBAPT] Community Prop. Agmt with unequal disposition
There is no such thing as a “statutory” CPA. The statute, cited in Doug’s
question, simply refers to the status or disposition on death of either.
The rest of the so-called “three-prong” CPA is a creation which has until
the past half century been standardized through custom and usage, and was
based on common law principles of gifting, love and affection, and the
ability to dispose of one’s property as one sees fit, by contract entered
into before death without the formalities of a will. The conversion was
never part of the statute, by was included later, and modified in many
ways, one of which was to defer conversion of separate property to
community property until later. Pursuant to the statute, a married – or
domestic partner – couple can dispose of the community property by
agreement any way they please upon the death of either of them. A problem
may arise if they agree to give all the community property away upon the
first death, leaving the survivor impecunious by virtue of not having any
separate property. Another problem may arise if a judge is not educated
about the actual language of the statute and presumes that all property
was converted to community, and that it all goes to the surviving spouse.
A third problem can arise from complexity, because the agreement can
become useless for the transfer of title to real property, which would not
be a problem here because probate is contemplated in the agreement.
S
From: wsbapt-owner at lists.wsbarppt.com
[mailto:wsbapt-owner at lists.wsbarppt.com] On Behalf Of Ralph Maimon
Sent: Friday, August 01, 2014 1:21 PM
To: wsbapt at lists.wsbarppt.com
Subject: RE: [WSBAPT] Community Prop. Agmt with unequal disposition
If I am not mistaken, the statutory CPA states that all current property
is currently transformed to CP.
I would ask, is that the only way to do one? This is an interesting
estate planning question and I look forward to the responses.
Ralph Maimon
Law Office of Ralph Maimon, P.S.
2811 E. Madison Street
Suite 202
Seattle, WA 98112
Tel: (206) 323-0911
Fax: (206) 462-1505
rmaimon at maimonlaw.com
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From: wsbapt-owner at lists.wsbarppt.com
[mailto:wsbapt-owner at lists.wsbarppt.com] On Behalf Of Doug Schafer
Sent: Friday, August 01, 2014 1:18 PM
To: wsbapt at lists.wsbarppt.com
Subject: [WSBAPT] Community Prop. Agmt with unequal disposition
Feedback sought:
Proposed customized Community Property Agreement would recite:
1. agreement takes effect upon death of first spouse, if neither has
commenced dissolution before that.
2. all property of either spouse or both spouses is converted (at the
first death) to community property.
3. at the first death, 55% of the CP will vest in H if he survives, or be
disposed of by his will if he dies first.
4. at the first death, 45% of the CP will vest in W if she survives, or
be disposed of by her will if she dies first.
Does anyone doubt that (3) and (4) would be upheld? It's common for
judges in disso proceeding to divide CP unequally, so it ought to be
permissible for spouses to do so by contract. (RCW 26.16.120 "...
concerning the status or disposition of the whole or any portion of the
community property ...")
The couple (2nd marriage) wishes to keep affairs simple and to comingle
H's recent inheritance with their pre-existing comingled assets. But H
wishes to control disposition of the greater-than-50% percentage of the
whole because of his inheritance.
Doug Schafer
=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D
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