[WSBAPT] Washington Estate Tax - CIR Property

[James W. Spencer]

Greetings Steven:

This is a fascinating question, perhaps of first impression (I am very interest to learn if anyone has tackled this issue).

I teach community property at Seattle University Law (and have for almost a decade). We're in the throes of CIR right now in class. One of CIR's foundational cases, Connell, says:

"We hold income and property acquired during a [committed intimate] relationship should be characterized in a similar manner as income and property acquired during marriage. Therefore, all property acquired during a [committed intimate] relationship is presumed to be owned by both parties. This presumption can be rebutted. See Estate of Madsen v. Commissioner of Internal Rev., 97 Wash.2d 792, 796, 650 P.2d 196 (1982). All property considered to be owned by both parties is before the court and is subject to a just and equitable distribution. In re Marriage of Lindsey, 101 Wash.2d 299, 307, 678 P.2d 328 (1984). The fact title has been taken in the name of one of the parties does not, in itself, rebut the presumption of common ownership. See Lindsey, 101 Wash.2d at 306-07, 678 P.2d 328; Merritt v. Newkirk, 155 Wash. 517, 520, 285 P. 442 (1930)."

-Connell v. Francisco, 127 Wn.2d 339, 351, 898 P.2d 831 (1995) (emphasis added).

I think that Olver will strengthen an argument to DOR that the decedent's actual estate is that property net the CIR interest:
"...our basic framework for property distribution after death [is that]...[f]irst, the decedent's property must be inventoried; a personal representative must determine what property belongs in the decedent's estate. RCW 11.44.015. Significantly, it was the inventory of Cung's estate that Olver challenged in this action on behalf of Thuy's estate. Clerk's Papers (CP) at 14 (Contradiction of Inventory). Only after the contents of the estate are established can the personal representative distribute the contents of the estate according to a valid will or the rules of intestacy. As the Court of Appeals aptly explained, 'we do not look to the intestacy statutes to determine what the decedent owned.' Olver, 131 Wash.App. at 144, 126 P.3d 69. Once a decedent's share is determined, 'that partner's share is the estate upon which the inheritance rules will operate.' Id. at 145, 126 P.3d 69."

-Olver v. Fowler, 161 Wn.2d 655, 669, 168 P.3d 348 (2007).

As community-like property is subject to the analogous presumption under RCW 26.16.030 under Connell, I think there's a good faith argument to be had vis-à-vis estate valuation and estate tax reduction by the CIR interest, at least insofar as DOR is concerned.

Happy to field any questions.

Sincerely,

James W. Spencer
Attorney at Law
Brothers & Henderson, P.S.
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From: wsbapt-bounces at lists.wsbarppt.com <wsbapt-bounces at lists.wsbarppt.com> On Behalf Of Steven Matyas
Sent: Wednesday, January 29, 2020 1:41 PM
To: WSBA Probate & Trust Listserv <wsbapt at lists.wsbarppt.com>
Subject: [WSBAPT] Washington Estate Tax - CIR Property

Colleagues,

Has anyone had experience arguing to the Washington Department of Revenue a reduction in the gross taxable estate of a decedent based on the one-half community-like portion of the estate belonging to a committed intimate partner? We are handling an estate that is taxable, but a potential CIR partner has filed a TEDRA petition asking for an equitable division of the community-like portion of the estate. If this were a marriage, DOR would not require the surviving spouse's community share to be included in the taxable estate of the decedent. But what about the community-like portion of an estate belonging to a CIR partner?

Thank you in advance,

Steven Matyas
CURRAN LAW FIRM
555 West Smith Street
Kent, WA 98032
Main: 253 852 2345
Fax: 253 852 2030
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