Community property and buying a home in Washington

What counts as community or separate property?

The law starts from a simple split.

• Separate property is what a spouse owned before marriage, plus anything acquired later by gift, bequest, devise, descent or inheritance, with the rents, issues and profits of that property (RCW 26.16.010). A spouse can manage, sell or mortgage separate property without the other spouse joining in.
• Community property is everything else acquired after marriage by either spouse or both (RCW 26.16.030).

Registered domestic partners are covered by parallel wording: RCW 26.16.020 and 26.16.030 apply the same rules to a “state registered domestic partnership.”

The IRS notes in Publication 555 that Washington is one of the community property states and that income from separate property stays separate here. Whether a particular asset is community or separate can depend on the facts, so a family law attorney is the person to ask about a specific home.

Who has to sign when you buy or sell?

RCW 26.16.030 sets the key rules for real estate:

• Neither spouse may purchase or contract to purchase community real property unless the other joins the transaction or the purchase contract (subsection 4).
• Neither spouse may sell, convey or encumber community real property unless the other joins in signing the deed or other instrument, and both must acknowledge it before a notary (subsection 3).

See real estate attorney in Washington for who prepares these documents and closing costs in Washington for what the closing includes.

One spouse can also give a home to the other. A deed from one spouse to the other moves the property out of the community and into the receiving spouse’s separate property (RCW 26.16.050).

How can spouses hold title?

Washington’s title chapter sets presumptions that favor the community:

A joint tenancy must be created by a written instrument that expressly declares it (RCW 64.28.010). Either spouse can sever a joint tenancy, and the property is then presumed community property (RCW 64.28.040(2)).

What happens at divorce?

In a dissolution of marriage or domestic partnership, the court must divide the property and debts, community or separate, in the way that appears “just and equitable,” without regard to misconduct (RCW 26.09.080). The statute lists four factors the court must consider:

1. The nature and extent of the community property.
2. The nature and extent of the separate property.
3. The duration of the marriage or domestic partnership.
4. The economic circumstances of each spouse at the time of the division, including whether the family home should go to the spouse with whom the children live most of the time.

The statute sets no fixed ratio: “just and equitable” is judged on those factors.

What happens when a spouse dies?

If a spouse dies without a will, the surviving spouse receives all of the decedent’s share of the net community estate. Separate property is shared with children or other relatives depending on who survives (RCW 11.04.015). A spouse cannot leave more than one-half of the community property by will (RCW 26.16.030(1)).

Spouses may also sign a community property agreement about what happens to community property at the death of either one. It must be in writing, signed by both, and witnessed and acknowledged like a deed to real estate, and it can be changed the same way (RCW 26.16.120). It does not override creditors’ rights.

Does the home get a new tax basis at death?

Often yes. IRS Publication 555 explains that when one spouse dies, the full fair market value of community property, including the survivor’s half, generally becomes the new basis, provided at least half of its value is includible in the deceased spouse’s gross estate. The IRS example: community property with a basis of $80,000 and a value of $100,000 at death gives each half a basis of $50,000. The Publication says this rule does not apply to registered domestic partners. A higher basis can lower the gain when the survivor later sells; see capital gains on a home sale.

Who is responsible for debts?

Neither spouse is liable for the other’s debts incurred before the marriage or for the other’s separate debts (RCW 26.16.200). The earnings and accumulations of a spouse can still be reached by that spouse’s creditors for debts the spouse incurred before the marriage. Community real estate is also subject to mechanics’ liens and judgments for community debts (RCW 26.16.040).