§ 4.17 COMMUNITY PROPERTY AGREEMENTS

• Jurisdiction: Washington

§ 4.17 COMMUNITY PROPERTY AGREEMENTS

This section deals primarily with the statutory community property agreement of RCW 26.16.120, which permits a simple and certain way of disposing of community property upon the death of one spouse. Readers should note, however, that agreements between spouses, in general, are treated in Chapter 5, which includes material that relates to community property agreements.

In addition to the statutory agreement, broader agreements have been permitted by courts to (1) convert existing separate property into community property and (2) control the character of future acquisitions, so that what would otherwise be separate property is community property. These broader agreements have been called "three-pronged community property agreements," the third prong being the statutory device to dispose of community property at death. See Harry M. Cross, The Community Property Law in Washington (Revised 1985), 61 WASH. L. REV. 13, 64 (1986). See Chapter 5, § 5.01.

A community property agreement executed in compliance with the statute is not a will, but is a special contract. McKnight v. McDonald, 34 Wash. 98, 74 P. 1060 (1904). Thus, amendments to the laws relating to probate and the administration of decedents' estates do not affect the community property agreement statute. A community property agreement creates contractual rights. In re Estate of Lyman, 82 Wn.2d 693, 512 P.2d 1093 (1973) (approving and adopting the opinion in In re Estate of Lyman, 7 Wn. App. 945, 503 P.2d 1127 (1972)). Its provisions fixing disposition to take effect upon the death of either spouse are not affected by the subsequent mental incompetency of either. In re Estate of Brown, 29 Wn.2d 20, 185 P.2d 125 (1947). A community property agreement imposes no restriction upon the alienation of community property during the joint lives of the spouses. Hesseltine v. First Methodist Church of Vancouver, 23 Wn.2d 315, 161 P.2d 157 (1945). Hesseltine involved a statutory community property agreement, which is ambulatory and becomes effective as to community property held at the death of one of the spouses. However, the broader "three-pronged community property agreements" operate to convert separate property into community property immediately, unless it is otherwise agreed to postpone conversion until death. See Schweitzer v. Schweitzer, 81 Wn. App. 589, 915 P.2d 575, aff'd and remanded, 132 Wn.2d 318, 937 P.2d 1062 (1997); Bosone v. Bosone, 53 Wn. App. 614, 768 P.2d 1022 (1989).

Subsequent events may affect the application of a community property agreement. In In re Estate of Janssen, 56 Wn.2d 150, 151, 351 P.2d 510 (1960), the spouses executed a community property agreement reciting that "any community property then owned or thereafter acquired would, on the death of either, vest in the surviving spouse." The agreement did not include after-acquired separate property. The spouses separated, secured an interlocutory decree of divorce, orally agreed that all their acquisitions would thereafter be the separate property of the acquiring party, and lived separate and apart for at least 18 years. The court held that none of the acquisitions during separation were community property and thus did not pass pursuant to the community property agreement. The court did not rule that the agreement had been revoked; it simply did not apply to the after-acquired property because it was separate. In In re Estate of Lyman, 7 Wn. App. 945, a statutory community property agreement was executed by husband and wife. The wife later filed a divorce complaint and obtained a temporary restraining order. During the pendency of the divorce action, the husband made a will that excluded his estranged spouse. Upon the death of the husband, the wife dismissed the divorce action, recorded the community property agreement, and asserted her rights under it. The validity of the community property agreement was contested by the beneficiary of the deceased husband's will. The Court of Appeals affirmed the trial court's decree dismissing the attempt to probate the will. The court held that the community property agreement controlled. The court reasoned that the filing of a divorce complaint does not in itself serve to change the rights of the spouses with respect to their community property agreement. The husband's actions in making a will inconsistent with the community property agreement showed an intent to abandon the agreement. But that intent must be communicated to the other spouse, and the other spouse must acquiesce therein in order for the finding of revocation to be made. Cf. In re Marriage of Pratt, 32 Wn. App. 665, 649 P.2d 141 (1982), rev'd, 99 Wn.2d 905, 665 P.2d 400 (1983) (discussed in § 4.14, above).

In In re Estate of Bachmeier, 147 Wn.2d 60, 52 P.3d 22 (2002), the community property agreement had been executed by the parties in 1977. In 1998, the parties separated, and the wife, two days before her death, executed a will leaving her estate to her daughter and expressly disinheriting her husband. The husband asserted his rights under the community property agreement, and the daughter argued that because the parties had separated, the agreement was impliedly revoked. At issue in Bachmeier was the third or "statutory" prong, leaving all property to the surviving spouse on the death of the first spouse. The Supreme Court held that implying a revocation upon separation would be rewriting the parties' contract and would be adding a term "contrary to the express intent of the parties, upon mere speculation." Id. at 69. Although Bachmeier only involved whether the third prong was impliedly revoked by separation, the language of the court was sufficiently broad to indicate that no part of an agreement could be impliedly revoked by separation absent some indication of intent in the document itself.

Practice Tip: Community property agreements should expressly provide that the agreement is terminated upon filing of dissolution of the marriage by either party, if the parties would want testamentary freedom while a dissolution was pending and separate ownership of property acquired during that time.

Because a community property agreement is a contract, it is to be construed in accord with general rules of contract interpretation, including questions of the intention of the contracting parties. In In re Estates of Wahl, 99 Wn.2d 828, 664 P.2d 1250 (1983), the Supreme Court held that "inconsistency between the wills and the community property agreement creates an ambiguity which requires the admission of extrinsic evidence to ascertain the intent of the parties." Id. at 831; see Schweitzer v. Schweitzer, 81 Wn. App. 589.

The first requirement of the statute is the execution of "an instrument in writing under their hands and seals." The private seal has been abolished in this state. RCW 64.04.090. The community property agreement statute, which antedates the abolition of private seals, should not be construed as retaining the private seal for purposes of community property agreements. The practice in the state is to disregard that requirement.

Second, the statute requires that the instrument be "witnessed, acknowledged and certified in the same manner as deeds to real estate are required to be, under the laws of the state." RCW 26.16.120. The formal requirements for deeds to real estate are set forth in RCW 64.04.020: "Every deed shall be in writing, signed by the party...