Dissolution of Marriage and Community Property

1. Dissolution of Marriageand Community Property

2. Dissolution of Marriage • In Washington, divorce is called “Dissolution of Marriage” and it is governed by RCW 26.09 • Washington is a “no-fault” divorce state. That means you do not have to allege or prove any reason for the dissolution beyond “irreconcilable differences.”

3. Filing For Dissolution • Dissolution is relatively easy under Washington law. • A person wishing to have her marriage dissolved must: • File a petition with the court • Joint petition, or • Petition gets served on other spouse • Wait 90 days • Receive final Dissolution Decree • Both parties agree to the decree and it is accepted by the judge at a hearing, or • Dissolution is adjudicated before a judge and the judge enters a decree, or • Default decree is entered

4. Dissolution Decree • Ends the marriage • Addresses the following issues • Community property and debt allocation • Parenting plan • Custody rights • Child support • Spousal maintenance • Restraining orders

5. What is Property? • In the context of marriage, property includes: • Real Property: Houses and Land • Personal Property: Furnishings, cars, clothes • Financial Assets: Cash, Investments • Future Interests: Pension funds, life insurance • Contractual Rights

6. Community Property • Washington is a community property state • Each spouse is regarded as contributing to the well being of the community and equally shares in the financial well being of the community • Each spouse has a one-half interest in any property acquired by the marital community

7. Marital Community

8. When Does Community Property Matter? • Community property becomes an issue when: • The marriage is dissolved • One spouse dies • One spouse wishes to dispose of some of the community property

9. Money Flowing Into the Community • Almost any money that a spouse earns during marriage is considered community property • This includes: • Salaries, wages, and other compensation • “Windfalls” • Sale of community property • Interest and rents from community property

10. Money Flowing out of the Community • In general, property obtained by the couple with community funds becomes community property

11. Marital Community Wife’s Salary Husband’s Salary Wife’s Labor Husband’s Labor COMMUNITY PROPERTY

12. Money Flowing into the Community from Community Property • In general, any funds flowing from community property into the community become community funds • Rent • Sale • Investment Proceeds • Interest • Appreciation

13. INTEREST DIVIDENDS RENT SALE Marital Community

14. Separate Property • There is a strong presumption that any property or funds obtained during a marriage are community property • However, some property is considered the separate property of one spouse or the other

15. Separate Property • Separate Property Includes • Property held by a spouse prior to marriage • Property received as a gift or inheritance by one spouse • Rents, interests, or profits from any separate property

16. Separate Property • New property purchased with the proceeds of separate property is considered separate property • This concept is called tracing • If the $$$ used to obtain property came from the community, the new property is community property • If the $$$ used to obtain property came from one spouse’s separate property, the new property is that spouses separate property

17. Wife receives inheritance from father Wife uses inheritance to buy new car The car is the wife’s separate property WIFE’S SEPARATE PROPERTY =

18. Case Study 1

19. Case Study 1

20. Gifts & Intimate Personal Property • One spouse may give a gift to the other and that gift will be separate property. The intent to give the property as a gift must be obvious. • Some property is considered so intimate as to always be considered separate property: • Clothes • Jewelry

21. Mixed Property • It is not uncommon for a couple to use a mixture of community and separate funds to make large purchases such as houses • It is also not uncommon for one spouse to own a house prior to marriage and to make payments on the house from community property following marriage or to use his or her labor to improve the house during marriage • Both of these situations create some of the most confusing issues in community property

22. Purchases of Mixed Property • When property is purchased using both community and separate property, the property is proportioned

23. Marital Community $100,000 $100,000 $100,000 Couple buys a $300,000 house and uses $100,000 from the wife’s separate property, $100,000 from the husband’s separate property and $100,000 from community property. The house is 1/3 wife’s, 1/3 husband’s and 1/3 Community property

24. Marital Community If the house appreciates to $600,000, the wife has $200,000 in separate property, the husband has $200,000 in separate property and the community has $200,000 in property. $200,000 $200,000 $200,000

25. Community Expenditures on Separate Property • Two common situations arise when one spouse owns separate property such as a house prior to marriage • The community uses its labor to improve the house • The community pays the mortgage on the house

26. Community Labor • When the community exerts its labor on separate property, it creates a community interest for that value in the property • For example, if a wife owns a house and the husband builds a new deck that causes the value of the house to increase by $50,000, the community now has a $50,000 interest in the house

27. Community Pays Mortgage • When the community pays mortgage on separate property owned by one spouse, that spouse owes the community for that expenditure • For example, if the mortgage on the wife’s house is paid with her salary while the couple is married, she owes the community the value of all of those mortgage payments

28. Case Study 2

29. Case Study 2

30. The House • The houses is the wife’s separate property, however the community has an interest in the house from • The mortgage paid during the marriage • The labor that the husband did on the house

31. Personal Injury Awards • Personal injury awards for medical expenses and for lost wages are community property • Personal injury awards for pain & suffering are separate property of the spouse who was injured

32. Case Study 3

33. Case Study 3

34. Separation • A married couple continues to accrue community property until they either divorce or the marriage is defunct • Defunct is a legal term that means more than mere separation • In general, the couple must have no intention of getting back together

35. Case Study 4

36. Case Study 4

37. Dissolution of Marriage • Upon dissolution of marriage, each spouse gets: • His or her separate property • One half of all of the community property • This does not mean that you split the house in half – it means that the court will balance the distribution of property so that each gets ½ of the total value

38. Dissolution of Marriage • In Washington, judges have a great deal of discretion to equitably distribute the property and give one spouse more or less than 50% of the community property • For example, if the husband is a drug addict who has never held a job, the court may not grant him ½ of the community property accrued through the wife’s labor

39. Death • Community property laws limit a spouse’s ability to dispose of property through a will at his or her death • At death, a spouse may dispose of: • His or her separate property • One half of the community property

40. Community Property and Non-Married Couples • Meretricious Relationships • Relationships must be stable and marital like • Duration of the relationship • Cohabitation • Pooling of resources • Intent of the parties • Purpose of the relationship • Parties must know that they are not married

41. Equity • If a judge finds that a meretricious relationship exists, she will use her equitable powers to fairly distribute property based on community property principles