Married Persons Property Problems
While this blog is directed at Estate Planning for
the Recently Divorced, we are creatures of habit. If you were married, you will probably marry again. Even so, you might be reading this blog
while going through a divorce, or even if you are happily married, because I am
trying to give everyone some good information. Under any of these situations, in California, we need to
understand several property concepts, including: Separate Property, Community
Property, Quasi-Community Property and how these may affect you ability to plan
and give.
Let’s start with some definitions. Assuming you are single, and have never
been married, then Separate Property is whatever you have. However, if you are or have been
married, then you need to know that Separate Property of a married person
includes all property owned by that person before marriage, all property
acquired by that person during marriage by gift, bequest, devise or descent,
and the rents, issues, and profits from any of the aforementioned
property. Family Code §770. Community Property is all
property, real or personal, wherever situated, acquired by a married person,
during marriage, while domiciled in California. Family Code §760 and Probate Code §28. You may have noticed that Community
Property had an added layer of time, status and location, that is, being
married while in California. This
distinction is important when understanding the third property type,
Quasi-Community Property, which is all property, real or personal, wherever
situated, acquired by either spouse, during marriage, while domiciled other
than in California, which would have been considered community property if they
had been domiciled in California OR in exchange for real or personal property,
wherever situated, which would have been community property under the
code. Family Code §125 and Probate
Code §66. These classifications
sound more difficult than they are, but are very much driven by actual facts of
date, time, location and source of funds.
This must be determined in order to decide if you have any power or
control to include these in your Estate Plan.
Obviously, as a single person, never married, this
is a non-issue. As a married
person, you and your spouse should know and discuss these questions in
developing either a single Estate Plan or compatible separate Estate
Plans. As someone who was married
and is now recently divorced or coming out of a divorce, you must be clear and
careful that all property disposed of, allocated, or divided through the
divorce has gone through this filter, and is properly re-titled so that you can
make a clear Estate Plan.
So, what difference does property type make? A married person can have Separate
Property. A married person may
convey the Separate Property any way they want, and without consent from their
spouse. FC §770(b). Equally, they have complete discretion
and full testamentary power over their Separate Property. PC §6101. Additionally, a married person may “transmute” or convert
their Separate Property into Community Property. FC §850. This
can be a part of your Estate Planning process or equally a mistake if not fully
understood.
As for Community Property, as well as
Quasi-Community Property, both spouses have a present, existing and equal
ownership interest during their marriage.
FC §751. While both spouses
are living, they each have an equal and undivided one-half interest in that
property. However, while this is a
joint interest in the property, upon the death of either spouse, one-half of
that community property automatically belongs to the surviving spouse and the
other half belongs to the deceased spouse and may be disposed of under
the deceased spouse’s will. PC
§100 and PC §6101. This is a
critically important point, as the issue of taxes and basis value create the
reasoning behind the Estate Plan to be discussed in future blogs.
So, while you have testamentary capacity over all of
your non-transmuted Separate Property, as well as half of the Community and
Quasi-Community Property, what happens if you try to Will-away more than your
half? You trigger the Widow’s
Election. If the first spouse to
die tries to dispose of more than their Separate Property and their share of
the Community and Quasi-Community Property, and in doing so adversely affects
the surviving spouse’s property rights, then the surviving spouse is put into a
situation where to they cannot simultaneously take under the will and take
their share. It may sound unusual,
but the surviving spouse is in an all or nothing situation. Take your automatic property rights or
take through the will. There is no
partial or picking and choosing.
This is based upon old doctrines of law, which we won’t get into here.
What is the survivor to do? The surviving spouse, widow or widower,
can consent to the excessive gifting, to the survivor or away from the
survivor. The survivor may elect
to take their right in property.
This is the election, to agree or not to agree. The reasons and ramifications are too
complex for this blog right now.
Suffice it to say that there are control reasons, such as family
business or property to move to the next generation, there may be control
reasons to provide for management and income for a surviving spouse, and also
issues of probate, tax and overall financial impacts. Rather than forcing this dilemma through a Will as the sole
Estate Plan, similar and less stressful results may be accomplished through a
more routine Trust mechanism.
I hope you will review your Estate Plan with you're
“A” Team, or at least begin to seek out an Estate Planning Attorney to start
this process. Stay tuned for
future blogs. However, if you have
any questions, feel free to respond below, or if you are interested in learning
more about an Estate Plan, Wills, Trusts, Advanced Healthcare Directives, or
Divorce, Custody, Visitation, Child Support, Spousal Support, Property Division,
Modifications, Remarriage, or Pre-Nuptial Agreements, please contact me at please contact me at fbegun@gmail.com, or through my
other websites, www.fcbegun.com, or www.linkedin.com for Fred Begun.
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