[WSBARP] TIC or JTWROS?

Thu Sep 12 16:22:31 PDT 2019

An interesting twist to the analysis from the perspective of Medicaid Long Term Care Planning and the use of Spousal Testamentary Supplemental Needs Trusts to preserve marital assets and eligibility for the Medicaid LTC (not saying that was the intent in your case, Mark):  Many practitioners will embed these special types of trusts into each spouse's will, notwithstanding that there is no indication for a need for the Medicaid in the foreseeable future.  In order to avoid the potentially unintended consequence of a perfectly healthy surviving spouse now having half of the marital estate out of his/her control, and possibly under the control of an unwanted and controlling trustee - for this type of trust to work, spouse cannot be trustee -  (remember Eugster?) - some folks add a "trigger" clause in the will, which basically states only put my share of the estate in trust for my spouse if (I'm paraphrasing here) he/she is receiving LTC or intends to apply for it.  DSHS has said that the trigger will only work if the surviving spouse is not the PR of deceased spouse's will and is not trustee of the trust - thus, still no control over the decision or potentially loss of control over half the assets.  This is because DSHS will otherwise treat it as the well spouse "disclaiming" it (gifting penalty to irrevocable trust if found to be disclaimed - and trust would not be able to be for his/her benefit under that circumstance).  I do not embed those trusts automatically - I evaluate the timing for the trust; and the timely use of a Separate Property Agreement (as opposed to a community property agreement) which waives the grantor spouse's right to administer any community property share - and disclaiming any community interest in property in favor of grantee spouse as his/her separate property (no gifting penalty between spouses) - which also conveys title as the separate property to the well spouse (no estate recovery).  I'm just ruminating here on the importance once again of the Separate Property Agreement in conjunction with the long term care planning and the prudent timing of, or at least well-informed client, regarding the timing of the testamentary supplemental needs trust and control.

With the email string below, I don't know if that was the intent or not, and I concur wholeheartedly regarding the LOPA and also the presumption that conveyance to h/w on a deed is default characterized as community property unless specifically stated as TIC.  (In re Salvini's Estate.  This is also referenced in the WAPRAC series section 1.28).

Regards,
Nancy Lee

Nancy J. Lee
Attorney at Law
1011 E. Main, Ste. 449
Puyallup, WA 98372
253-904-8612 fax 253-904-8736
nancy at nancyleelaw.comcastbiz.net

From: wsbarp-bounces at lists.wsbarppt.com <wsbarp-bounces at lists.wsbarppt.com> On Behalf Of Mark Vohr
Sent: Thursday, September 12, 2019 11:52 AM
To: WSBA Real Property Listserv <wsbarp at lists.wsbarppt.com>
Subject: Re: [WSBARP] TIC or JTWROS?

Eric, Sarah and Steve -

            Thank you for that thorough analysis.   All excellent points and important distinctions to consider.   I also appreciate the input on the option of possibly substituting other property, which might work as all this property (both decedent's and surviving spouse's property is going into trust and these particular parcels are likely going to be converted to cash.  I also appreciate the important distinction between the probate process, and the inclusion of all the community property in the estate, surviving spouse's right to administer, and the options that statutory structure presents.  Thank you all for bringing those points to the front.

Regards,

Mark

Mark C. Vohr
Ohana Fiduciary Corp.
Ohana Financial Services
A Washington Trust Company
Mark C. Vohr, J.D., CPG, Principal
PO Box 33710  Seattle, WA  98133
T:  (206) 782-1189 F:  (206) 782-1434
mcv at ohanafc.com<mailto:mcv at ohanafc.com>      www.ohanafc.com<http://www.ohanafc.com>

From: wsbarp-bounces at lists.wsbarppt.com<mailto:wsbarp-bounces at lists.wsbarppt.com> <wsbarp-bounces at lists.wsbarppt.com<mailto:wsbarp-bounces at lists.wsbarppt.com>> On Behalf Of Stephen A. Brandli
Sent: Thursday, September 12, 2019 10:46 AM
To: 'WSBA Real Property Listserv' <wsbarp at lists.wsbarppt.com<mailto:wsbarp at lists.wsbarppt.com>>
Subject: Re: [WSBARP] TIC or JTWROS?

Is the following not true?

Husband can devise one-half of the community property, but not necessarily one-half of each asset.  The estate can choose to distribute to the wife her one-half interest in the community property using disproportionate asset divisions.  See RCW 11.98.070(15); Estate of Ehlers, 80 Wn. App. 751, 763 (1996); see also Estate of Westall, 4 Wn. App.2d 877 (2018) (spouse can sell deceased's interest in community property with court approval despite contrary provision in deceased's will).   The will does not change this.  Further, the wife has a right to administer the community property.  See RCW 11.28.030.

RCW 11.04.250 would vest all of the community property in the surviving spouse absent a will of the deceased that says otherwise, which apparently is the case here.  See Estate of Haviland, 117 Wn.2d 68, 79-80 (2013).

So a claw back would be required only if needed to distribute one-half of the total community estate to the trust.

                Steve Brandli
                Brandli Law PLLC
                Friday Harbor, Washington

From: wsbarp-bounces at lists.wsbarppt.com<mailto:wsbarp-bounces at lists.wsbarppt.com> <wsbarp-bounces at lists.wsbarppt.com<mailto:wsbarp-bounces at lists.wsbarppt.com>> On Behalf Of Eric Nelsen
Sent: Thursday, September 12, 2019 9:36 AM
To: wsbarp at lists.wsbarppt.com<mailto:wsbarp at lists.wsbarppt.com>
Subject: Re: [WSBARP] TIC or JTWROS?

I agree you need to claw it back; the husband's half interest should be transferred into the trust. Though if the Will/Trust terms allow it, I suppose you could instead make an alternative agreement with the surviving spouse, to other assets of equivalent value to put into the trust as a substitute.

Some technical supporting points that don't change the result:

If a parcel of real property is community property between two living spouses, it's not governed by tenant in common rules. Instead, management and control is governed by RCW 26.16.030<https://urldefense.proofpoint.com/v2/url?u=https-3A__app.leg.wa.gov_RCW_default.aspx-3Fcite-3D26.16.030&d=DwMFAg&c=euGZstcaTDllvimEN8b7jXrwqOf-v5A_CdpgnVfiiMM&r=K1mLMC1eFjwfeeMM-AC6zQ&m=4TlSVhphkEFeDMy6e7qWV6kRp73oA2DwFk2jV7siZu4&s=yDqOGLv5GoFdLGQCQ5EWodHz0lJA_pt1P2FyB-k_iWE&e=>. The actual name on the deed, even if it's only in one spouse's name, doesn't actually matter much except for some nuances relating to notice to third parties; see e.g. RCW 26.16.095 and RCW 26.16.100<https://urldefense.proofpoint.com/v2/url?u=https-3A__app.leg.wa.gov_RCW_default.aspx-3Fcite-3D26.16-26full-3Dtrue-2326.16.095&d=DwMFAg&c=euGZstcaTDllvimEN8b7jXrwqOf-v5A_CdpgnVfiiMM&r=K1mLMC1eFjwfeeMM-AC6zQ&m=4TlSVhphkEFeDMy6e7qWV6kRp73oA2DwFk2jV7siZu4&s=Ax3BKYlSeQq9UjSrMk0-gKjFFEUjXOWcWcq2QrI8BPo&e=>. See also In re Estate of Borghi, 167 Wn.2d 480, 219 P.3d 932 (2009), which states that the names on the deed don't really mean that much when it comes to determining characterization of the property as separate or community.

But once the first spouse dies, real property immediately vests in the surviving spouse as the heir at law to all community property, RCW 11.04.250<https://urldefense.proofpoint.com/v2/url?u=https-3A__app.leg.wa.gov_RCW_default.aspx-3Fcite-3D11.04.250&d=DwMFAg&c=euGZstcaTDllvimEN8b7jXrwqOf-v5A_CdpgnVfiiMM&r=K1mLMC1eFjwfeeMM-AC6zQ&m=4TlSVhphkEFeDMy6e7qWV6kRp73oA2DwFk2jV7siZu4&s=DmYPcO9eURoqVhQK4_fXEAzA6Cu9aMRAK0AfIHDTnPI&e=>, but subject to all debts, etc., of the decedent, and if a probate is commenced the PR ends up with control and can effectively divest the spouse.

When the probate commences it acquires jurisdiction over the entirety of community property. The death of a spouse terminates the marital relationship and the "marital community." Bank of Montreal v. Buchanan, 32 Wn. 480, 73 P. 482 (1903); see also Washington State Bar Assn. Community Property Deskbook (4th ed. 2014) (hereinafter "CP Deskbook"), Sec. 4.11. At death of the first spouse, the community "ceases to exist." Sutton v. Hirvonen, 113 Wn.2d 1, 6, 775 P.2d 448 (1989). The first deceased spouse's Estate accordingly has jurisdiction over all community property and community liability, not just the decedent's half, in order to dispose of all community matters. Ruth v. Dight, 75 Wn.2d 660, 670, 453 P.2d 631 (1969) (claim against the community cannot be pursued against surviving spouse if not also properly brought against the deceased spouse's estate); Gilliam v. City of Centralia, 14 Wn.2d 523, 531, 128 P.2d 661 (1942) (deceased spouse's Personal Representative, not the surviving spouse, has authority to pursue a community claim); Magee v. Big Bend Land Co., 51 Wash. 406, 408, 99 P. 16 (1909) (administration of first spouse's estate had jurisdiction and authority to sell the entire community real property). See also CP Deskbook, Sec. 4.13.

So at the end of the probate the PR, in accordance with the Will and assuming all debts, etc., have been paid, could distribute the decedent's one-half interest in the community real estate into the Trust. At that point, and no sooner, do the tenant-in-common rules apply, to the Trust and the surviving spouse as tenants in common.

Sincerely,

Eric

Eric C. Nelsen
SAYRE LAW OFFICES, PLLC
1417 31st Ave South
Seattle WA  98144-3909
phone 206-625-0092
fax 206-625-9040

From: wsbarp-bounces at lists.wsbarppt.com<mailto:wsbarp-bounces at lists.wsbarppt.com> [mailto:wsbarp-bounces at lists.wsbarppt.com] On Behalf Of Mark Vohr
Sent: Wednesday, September 11, 2019 5:33 PM
To: wsbarp at lists.wsbarppt.com<mailto:wsbarp at lists.wsbarppt.com>
Subject: [WSBARP] TIC or JTWROS?

I have a title person in Jefferson county telling me it's common practice in title companies when property is acquired as "husband and wife" (the type of ownership - TIC or JTWROS is not indicated in the deed)  to pass the ownership to the surviving spouse without any kind of conveyance since Washington is a community property state, all they require is proof of death of the spouse.  Title has always done this, we've used death certificates, lack of probate affidavit's or actual probates as proof of death of the spouse and then just vest the ownership in the surviving spouse.

My understanding is that a transfer to H&W (or any conveyance to more than one person) without indicating the type of ownership creates a tenancy in common, RCW 64.28.020.   In our case the decedent left his entire estate in trust for his surviving spouse, which I would conclude would include his TIC share in real property.  Title transferred it all to the surviving spouse.  It would seem we have to claw it back.

Thoughts?  Thanks in advance.

Regards,

Mark

Ohana Fiduciary Corp.
A Washington Trust Company
Mark C. Vohr, J.D., CPG, Principal
PO Box 33710  Seattle, WA  98133
T:  (206) 782-1189 F:  (206) 782-1434
mcv at ohanafc.com<mailto:mcv at ohanafc.com>      www.ohanafc.com<https://urldefense.proofpoint.com/v2/url?u=http-3A__www.ohanafc.com_&d=DwMFAg&c=euGZstcaTDllvimEN8b7jXrwqOf-v5A_CdpgnVfiiMM&r=K1mLMC1eFjwfeeMM-AC6zQ&m=4TlSVhphkEFeDMy6e7qWV6kRp73oA2DwFk2jV7siZu4&s=Na_hI-dx2Nf_646jqmMuhHF3nKcXh6kXkYcqzZrKfE4&e=>

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