[WSBAPT] Will/CPA
Jeff at bellanddavispllc.com
Jeff at bellanddavispllc.com
Wed Jul 14 10:44:36 PDT 2021
This is an interesting thread regarding the CPA trumping the Will. The usual scenario I’ve run into is H & W’s estate is close to the State’s estate taxable amount. Clients, of course, hate the thought of that huge expense to probate, when the first spouse passes, so like the community property agreement. However, should the combined estate be over the taxable amount, they have Wills that leave everything to each other with the survivor given the right to disclaim assets to a credit trust. On the death of the first spouse, under either document, the surviving spouse takes all, it is just a matter of tax planning, whether you record the CPA and avoid probate, or probate the will to take advantage of the disclaimer provisions.
I’ve lost sight of Ken’s original problem with the SNT. I assumed the couple had a CPA, but it was later determined either one or both of them would need a SNT that is set out in their wills. I did not assume that trust would be funded through a disclaimer, but was a forced funded trust. Again, if wife wants to fund the SNT, just do the probate and not record the CPA. I assume, also, when wife passes, the SNT terminates and any remaining assets go to H & W’s heirs. The only entity that is “deprived” is the State which can’t recover any benefits provided wife. I do not see a problem choosing the Will over the CPA.
Jeff
W. Jeff Davis
BELL & DAVIS PLLC
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From: wsbapt-bounces at lists.wsbarppt.com <wsbapt-bounces at lists.wsbarppt.com> On Behalf Of Joshua McKarcher
Sent: Wednesday, July 14, 2021 10:08 AM
To: WSBA Probate & Trust Listserv <wsbapt at lists.wsbarppt.com>
Subject: Re: [WSBAPT] Will/CPA
Right, that is not necessarily an “asset-protected trust.” Also, disclaimer does not always equate to “if surviving spouse disclaims then deceased spouse’s property goes to the probate estate.” Rather, one must carefully analyze the result of disclaimer: does it end up with the disclaiming spouse’s children, a testamentary trust, or other? The CP agreement may provide a rule, or state law may.
I also occasionally use CP agreements with accompanying wills, but they all must “thread together” carefully is the key point.
And, I’m not sure a CP agreement should NOT be revocable by one spouse who files, say, a petition for legal separation. At that time, the petitioning spouse should “probably” as a matter of public policy have at least an equitable right to dispose by a new and “conflicting” will her half of the community and her separate property. But perhaps that argument would be available to her purported devisees under the court’s equitable power described in RCW 26.16.120.
Joshua D. McKarcher
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From: <wsbapt-bounces at lists.wsbarppt.com <mailto:wsbapt-bounces at lists.wsbarppt.com> > on behalf of "Diane J. Kiepe" <DJKiepe at depdslaw.com <mailto:DJKiepe at depdslaw.com> >
Reply-To: WSBA Probate & Trust Listserv <wsbapt at lists.wsbarppt.com <mailto:wsbapt at lists.wsbarppt.com> >
Date: Wednesday, July 14, 2021 at 9:47 AM
To: "cole-gilday at stanwoodlaw.net <mailto:cole-gilday at stanwoodlaw.net> " <cole-gilday at stanwoodlaw.net <mailto:cole-gilday at stanwoodlaw.net> >, WSBA Probate & Trust Listserv <wsbapt at lists.wsbarppt.com <mailto:wsbapt at lists.wsbarppt.com> >
Subject: Re: [WSBAPT] Will/CPA
Where you need to be careful though is the overlap between disclaimers and the rules related to 3rd party SNT. I believe where a surviving spouse disclaims and the property ends up in a trust for surviving spouse it may be viewed as self-settled for Medicaid purposes. Perhaps since the PR has sole discretion to fund or not fund this changes the results. In fairness, the Medicaid/Disclaimer issue is one I simply know enough that I need to tread carefully and I work with my partner if we are involved in SNT with Disclaimer.
Whew – so many pitfalls.
Diane J. Kiepe
Diane J. Kiepe
Douglas Eden
717 W. Sprague Ave.
Suite 1500
Spokane, WA 99201
djkiepe at depdslaw.com <mailto:djkiepe at depdslaw.com>
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From: wsbapt-bounces at lists.wsbarppt.com <mailto:wsbapt-bounces at lists.wsbarppt.com> <wsbapt-bounces at lists.wsbarppt.com <mailto:wsbapt-bounces at lists.wsbarppt.com> > On Behalf Of Ryan P. Coon
Sent: Wednesday, July 14, 2021 9:33 AM
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Subject: Re: [WSBAPT] Will/CPA
Also see RCW 11.86 regarding disclaimers of interests. Under 11.86.011(6)(n) the statute specifically contemplates disclaimers of interests under community property agreements.
Thus, I don't see any problem with executing a will and community property agreement concurrently and then choosing which to use at the time of the death of the first spouse. When the first spouse passes the survivor can simply choose whether to (1) use the CPA to dispose of property or (2) disclaim interest under the CPA and probate the will instead.
However, it would probably be best practice to include in the CPA a provision contemplating disclaimer and/or to have a the survivor sign a disclaimer of interest at the time of such disclaimer (in Norris v. Norris disclaimer was implied by the fact that the survivor discussed whether to use the will or the CPA and ultimately decided to probate the will).
Very Truly Yours,
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On 7/14/2021 9:10 AM, Heather de Vrieze wrote:
FWIW – Briefing on this issue from early in my practice (in other words, a really long time ago). I haven’t researched it recently, but am unaware of any substantive changes to case law.
3.1 A community property agreement is a contract authorized and controlled by R.C.W. §26.16.120, and remains in effect until rescinded by a valid agreement of the parties. See In Re Estate of Catto, 88 Wn App. 522, 944 P.2d 1052 (1997); In re Estate of Lyman, 7 Wn. App 945, 503 P.2d 1127 (1972). In Catto, the wife executed a inconsistent will and filed for divorce, but because the community property agreement did not include a clause terminating it on divorce. The beneficiaries of Mrs. Catto’s will contended that the community property agreement should be nullified because the marriage was defunct at the time of her death. The court specifically found that the marriage was defunct, but held that because the agreement had no clause indicating termination in the event of a defunct marriage, it would not imply such a provision. Catto, supra, 88 Wn App at 529, 944 P.2d at 1056. Similarly, the status of the marriage between Mr. and Mrs. Stamper should have no bearing on the validity of the community property agreement.
3.2 The courts have long since determined that a “meeting of the minds”, or at least knowledge of and acquiescence to or reliance on the repudiation by one party is necessary to revoke or rescind a contract such as a community property agreement. “Uncommunicated subjective mutual intention to abandon is not enough.” In re Estate of Lyman, 7 Wash. App. at 949, 503 P.3d at 1131 (quoting Restatement of Contracts §§20,21&22(1934)). One party’s unilateral act cannot by itself serve to rescind the agreement. See, In re Estate of Lyman, supra; In re Estate of Catto, supra; In re Estate of Wittman, 58 Wn.2d 841, 365 P.2d 17 (1961). Further, to constitute intention to abandon, both foresight of the consequences to follow and a desire to do the thing foreseen is required. Lyman, supra. If there was no mutuality of intent, the agreement is still valid because there is no valid recission
3.3. Often spouses will execute wills contemporaneously with executing a community property agreement. This is to cover any property excluded from the agreement, or the eventuality of simultaneous deaths. In this case, no property was excluded from the terms of the community property agreement. If there were any assets not covered by the community property agreement, Olivia’s will could have dispositive control over those assets, but as no such assets exist, Olivia’s will should not have any force or effect. See, Lyman, supra. In fact, the events in the case at hand are similar to those of Wittman, in which the wife made a will purporting to dispose of only her one-half interest in their community property subject to a community property agreement. The husband made a will giving certain legacies to certain individuals and devising and bequeathing the residue to his wife. In fact Olivia Stamper’s will went one step further and specifically attempted to divest her husband of his one-half of the community assets. Such attempt should fail, as it did in Wittman where the court confirmed ownership of all assets on the surviving spouse.
3.4 A community property agreement such as the one at issue in this case is clear on its face and terms that it shall have the effect of vesting all property owned by the couple, or by the first spouse to die in the survivor. In re Estate of Wittman, supra.
There is no case law regarding waiver of contractual rights under a community property agreement. The similar but distinct principle of election has been examined by the courts. The only case where a spouse was estopped from having the probate court enforce a community property agreement instead of the will of the predeceased spouse was Norris v. Norris 95 Wash.2d 124, 622 P.2d 816 (1980).
ALSO FWIW – I use CPAs in my practice all the time and include a provision for unilateral revocation in the event of incapacity of one spouse and need for Medicaid.
Heather
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From: wsbapt-bounces at lists.wsbarppt.com <mailto:wsbapt-bounces at lists.wsbarppt.com> <mailto:wsbapt-bounces at lists.wsbarppt.com> <wsbapt-bounces at lists.wsbarppt.com> On Behalf Of Karen E. Boxx
Sent: Wednesday, July 14, 2021 7:34 AM
To: WSBA Probate & Trust Listserv <mailto:wsbapt at lists.wsbarppt.com> <wsbapt at lists.wsbarppt.com>
Subject: Re: [WSBAPT] Will/CPA
See Norris v. Norris, 25 Wn.App. 290 (1980). On W’s death, H opted to probate wife’s will even though there was a CPA in effect, and court held he had disclaimed his interest under the CPA. Some agreements provide that a surviving spouse can disclaim their interest at death of first spouse, so the terms of the agreement should be considered. But Diane is right - there are numerous cases where a CPA trumps terms of a will and other nonprobate transfers - see Lyon v. Lyon, 100 Wn.App. 409, where a CPA controlled over a joint tenancy with the deceased H’s brother (“ Which “instantaneous” event takes place first might muddle metaphysicians for millenia. There is a need to resolve the issue, however, and we hold that when the agreement simply conveys all community property to the surviving spouse, the agreement controls. It is the policy of law to favor community property and disfavor joint tenancies. ”)
Karen
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On Jul 14, 2021, at 7:22 AM, Diane J. Kiepe <DJKiepe at depdslaw.com <mailto:DJKiepe at depdslaw.com> > wrote:
Sarah,
I agree with the contract conclusion and that it isn’t a take it or leave it tool. That was said much better than my post stating that the CPA trumps the Will. Trump may have been a bad word. Because it’s a contract that takes effect on a death of one person there is nothing in the probate estate unless it is a CPA that only goes to character of property (not how it vests). I rarely see these.
I have been using CPAs for certain plans (all goes to first spouse on death) and where Medicaid qualification is unlikely (due to pension/ss or whatever) or where the parties acknowledge they want to use all their funds as they have for their best care and Medicaid only if absolutely necessary. With that being said, the some comments here certainly have given me food for thought.
Diane J. Kiepe
Diane J. Kiepe
Douglas Eden
717 W. Sprague Ave.
Suite 1500
Spokane, WA 99201
djkiepe at depdslaw.com <mailto:djkiepe at depdslaw.com>
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From: wsbapt-bounces at lists.wsbarppt.com <mailto:wsbapt-bounces at lists.wsbarppt.com> <wsbapt-bounces at lists.wsbarppt.com <mailto:wsbapt-bounces at lists.wsbarppt.com> > On Behalf Of Sarah McCarthy
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Subject: Re: [WSBAPT] Will/CPA
Here are 2 cents from a less seasoned player in this field than most of you:
A CPA is a contractual commitment as to how assets will vest after the first spouse’s death. I don’t view it as something a surviving spouse can simply discard if it winds up not being the best method of handling things after the first spouse’s death. For this reason it’s a tool that I don’t employ unless it’s clear that absolute vesting to surviving spouse on death is the only desired outcome. I do see it as trumping the will.
Though I am aware that some attorneys prepare these as an optional tool, and advise surviving spouses to choose whether or not to take under a CPA, depending on the circumstances after the first spouse’s death. I personally don’t agree with this approach. Either the spouses make a contractual commitment, or they don’t.
The CPA can however be drafted to permit revocation by a single spouse after one spouse’s incapacity (as may be needed for Medicaid or tax planning purposes), as well as an option for disclaimer by surviving spouse, which affords additional flexibility.
Sarah
Sent by dictation from my iPhone. Please excuse typos and missing punctuation!
On Jul 13, 2021, at 4:15 PM, Roger Hawkes <Roger at law-hawks.com <mailto:Roger at law-hawks.com> > wrote:
One of the main reasons not to do a cpa is the inability to do any sort of complex planning, like trusts etc.
From: wsbapt-bounces at lists.wsbarppt.com <mailto:wsbapt-bounces at lists.wsbarppt.com> <wsbapt-bounces at lists.wsbarppt.com <mailto:wsbapt-bounces at lists.wsbarppt.com> > On Behalf Of Diane J. Kiepe
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Subject: Re: [WSBAPT] Will/CPA
Ken,
If the SNT in the Will is for the surviving spouse, the CPA will be problematic. The CPA, if not revoked in any way, will trump the Will. I sense I may either be reading your note below wrong or missing a fact.
Happy to send you a direct e-mail with some additional information.
Diane J. Kiepe
Diane J. Kiepe
Douglas Eden
717 W. Sprague Ave.
Suite 1500
Spokane, WA 99201
djkiepe at depdslaw.com <mailto:djkiepe at depdslaw.com>
509-455-5300
From: wsbapt-bounces at lists.wsbarppt.com <mailto:wsbapt-bounces at lists.wsbarppt.com> <wsbapt-bounces at lists.wsbarppt.com <mailto:wsbapt-bounces at lists.wsbarppt.com> > On Behalf Of Ken Luce
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Subject: Re: [WSBAPT] Will/CPA
Concern is with CPA it eliminates provisions in their will for SNT
kl
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Subject: Re: [WSBAPT] Will/CPA
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Ken,
I would use what is most beneficial for the situation. Is there a surviving spouse? If so, wouldn’t the cpa be easier and avoid probate? What is the issue probating the Will(s).
Jeff
W. Jeff Davis
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From: wsbapt-bounces at lists.wsbarppt.com <mailto:wsbapt-bounces at lists.wsbarppt.com> <wsbapt-bounces at lists.wsbarppt.com <mailto:wsbapt-bounces at lists.wsbarppt.com> > On Behalf Of Ken Luce
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Subject: [WSBAPT] Will/CPA
At time of death with will and cpa is it mandatory the cpa be used? Both wills are identical.
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