What does “community property” mean?

Washington is a community property state, but what does that mean?  In Washington, the property owned by a person who is married (I’m using marriage and spouse in this post, but the same rules apply to a couple in a state registered domestic partnership) falls into two categories:  community property and separate property.  It is not unusual for couples to misunderstand the impact of having property in these two “statuses.”

Some couples—particularly where one or both of them own significant separate property—opt to enter into marital agreements that will alter how the law would otherwise treat community and separate property.

To understand community property, we first have to define two things: what we mean by “property,” and what kind of property is a community and what kind is separate.

In the community property context, property doesn’t mean just physical items you own, such as your house, car, furniture, etc.  It also includes things like retirement accounts, stocks, bank accounts, etc., as well as anything you and your spouse earn during the marriage, such as wages, income from rental property, stock dividends, bank interest, etc.

Now that we understand “property” for community/separate property purposes, how do we tell community from separate?  The best place to start is to define separate property.  Once we know that, then everything else is community property.

Separate property is property owned by a spouse prior to marriage or that he or she received during the marriage by means of “gift, bequest, devise, descent, or inheritance….”  In short, someone gave you a gift or you inherited property.  Any income or appreciation from that property is also separate property.  Also, property purchased with separate property is separate property.

As mentioned above, community property is simply anything acquired during a marriage that isn’t separate property.  This applies regardless of whose name is on the deed, title, etc.  It’s all community, and it includes any income generated by that community property, as well as any wages earned by either spouse.

Although separate property may start that way, it can be converted to community property either by agreement between the couple or by purposefully and inadvertently comingling separate with community property.  A prime example would be where a spouse has a bank account in their name when they marry and after marriage deposits their paycheck into the account.  After a while, even though the account titling hasn’t changed, the account becomes so hopelessly comingled with community property that it becomes community property.

So, now that we know the difference between community property and separate property, why should you care?  The primary reason to care is that there are some significant differences between what you can do with community property versus what you can do with separate property.

Your separate property is your property.  You don’t have to get your spouse’s permission to sell it, give it away, etc. (although you may end up with some significant nonlegal impacts on your relationship if you don’t at least let your spouse know what you’re planning).

For community property, there are some significant limitations on what either you or your spouse can do with the property unless the other one is involved in the process.  A partial list of the actions you can’t do on your own include:

• Give away community property;
• Sell or mortgage real property owned by the community;
• Purchase real property for the community;
• Sell household goods, furnishings, appliances, or a mobile home owned by the community.

Another difference between community and separate property is that, when you prepare your will, you can give away all of your separate property to anyone you choose, but you can only give away one-half of the community property.  You don’t have to leave your one-half of the community to your spouse.  If you die without a will, the law in the State of Washington provides that your spouse receives your half of the community property.

Some couples—particularly where one or both of them own significant separate property—opt to enter into marital agreements that will alter how the law would otherwise treat community and separate property.  For example, a couple can agree to keep their respective salaries as separate.  There are some very specific mechanics that go into these types of agreements, and a “do it yourself” agreement runs a significant risk of not being recognized by a court in a divorce or upon the death of a spouse.