§ 8.06 PRESERVATION OF COMMUNITY PROPERTY BROUGHT TO ANOTHER STATE

• Jurisdiction: Washington

§ 8.06 PRESERVATION OF COMMUNITY PROPERTY BROUGHT TO ANOTHER STATE

Advice may be needed, and sought, by spouses who are about to move to a separate property state with respect to how best to preserve the community property status of assets being taken to that state. This will especially be true if the spouses intend to remain in the separate property jurisdiction for only a limited period of time, with plans to return to Washington. Even if they do not plan to return, it is part of the task of the lawyer advising those clients to deal with the preservation of such property, if such preservation is deemed desirable, which it usually will be. Similar questions may arise with regard to community property taken from Washington to another community property state if that state does not recognize all of the ways in which a Washington couple may acquire community property. We address this last possibility at the end of this section.

Community property brought into common-law states risks losing its preservation of identity. In a number, perhaps the majority, of cases, mere lack of familiarity by common-law lawyers with the community property concept has been responsible for the proper questions not even being asked and rights not being protected. At the very least, it would seem that real property remaining in the state of Washington that was purchased by Washington domiciliaries as their community property will remain community property despite their move to a common-law state. However, to the extent that intangible personalty is involved, the chances for its loss of community identity become greater, especially if the property itself is changed in identity, e.g., sale of one stock and the purchase of another.

A few cases can be found in which courts not only recognized the continuing character of community property brought within common-law borders but gave full effect to the community property interests recognized. Thus, in People v. Bejarano, 145 Colo. 304, 358 P.2d 866 (1961), the court held that only a husband's one-half community property interest in an employee benefit plan was taxable for Colorado inheritance tax purposes upon the death of the husband. And in Ladd v. Ladd, 265 Ark. 725, 580 S.W.2d 696 (1979), a couple acquired community property while domiciled in New Mexico and then brought it to Arkansas, using some of it to purchase real property. The court held that the divorce court should have awarded the wife her full half-interest in this property, consistent with its community character.

Some courts recognize the community property status of property brought into the state from a community property state but apply different rules for division at divorce. In Karp v. Karp, 10 N.Y.L.J. 12, 12-13 (N.Y. Sup. Ct. 1987)—a New York trial court decision—a wife was denied a one-half interest in the spouses' community property upon the couple's divorce. The couple had lived in New York for almost 20 years, following about 13 years in California. The New York court awarded the wife only one-third of the parties' property by application of New York's equitable distribution law, instead of the one-half community interest the California courts presumably would have awarded to her. But this does not seem to have been a result of the court's refusal to recognize the community property nature of the property. Rather, it was a result of the New York court's refusal to apply the California rule calling for equal division at divorce and its application of New York's equitable division rule instead. In fact, the court applied New York's equitable division rule to all the marital property acquired by the couple, whether in California or New York. Moreover, the court made clear that had the marriage been terminated by death rather than divorce, the California community property would have been divided equally. Presumably, had the couple moved from California to Washington state, rather than to New York, a Washington court would have equitably divided the community property brought into the state from California as well.

In addition, several courts have protected the community nature of property brought...