Property Division in a Washington State Divorce
Like most western states, Washington is a community property state. Early on, western states adopted community property regimes in order to entice women to move out west. The idea was that if women were granted actual property rights, then they would hazard the journey to the frontier. It worked. This property rights regime still governs marital property rights division in Washington to this day.
How is Property Divided in a Community Property State?
In essence, community property laws analogize marriage to a business partnership. When you’re a sole proprietor, you work for yourself; when you have a partner, you work for the partnership. Prior to marriage, your labor, income, and the stuff you buy all belongs to your separate estate. Once you get married, however, your income and the stuff you buy with it belongs to the marital community. Just as a partner in a business labors on behalf of the partnership, the married person now labors on behalf of the marital community.
It usually doesn’t really matter how things are titled. Often, what matters most is when an asset was acquired. If an asset was acquired during the marriage it is almost always community property. This time of acquisition presumption can be rebutted, but only by showing that the asset was acquired with separate property funds (i.e., money that existed prior to the marriage, inheritance, or income from a separate property asset).
This fact surprises many people. Couples will often maintain separate bank accounts during their marriage, thinking that holding their income in separately titled accounts somehow means the money is their separate property. This arrangement does not, in fact, preserve or create separate property. Indeed, to the extent that marital earnings are placed into a separately titled account that existed prior to marriage, any separate funds in the account will likely be deemed “comingled” with the post-marital deposits and deemed transmuted into community property.
If you have a premarital agreement (sometimes referred to as a “prenuptial agreement” or “prenup”), however, it could supersede some or all of Washington’s community property laws. The family law attorneys at S.L. Pitts are skilled at evaluating existing agreements during the separation process to preserve the best interests of our clients.
The First Step in Property Division is to Identify all Assets as “Community” or “Separate”
For most people, identifying property simply entails sitting down and writing a list of the separate and community property that they and their spouse own. Because people usually have a lot of personal possessions of minimal value, it’s best to limit the list to items with at least a nominal minimum value. Limiting the list to items worth at least $1,000 usually keeps the list more manageable.
It is important to remember that “property” also includes contractual rights. This includes, for instance, life insurance contracts. There are also a host of employment-related assets that should be included in the identification of property where appropriate: retirement benefits, deferred compensation plans, severance pay, or unemployment benefits.
In addition, certain forms of income are deemed property in Washington State. Unvested stock (or other derivative securities) paid as part of a compensation plan is considered property in Washington State. A licensed professional’s income (doctor, lawyer, CPA, etc.) will often be deemed to be, in part, “professional goodwill” and should be identified as community property and divided in the divorce.
Having an experienced family law attorney ensures that all property is properly identified for property division in a divorce.
How is Property Valued in Washington State?
After every asset has been identified as either separate or community property, the next step is to place a value on each one. Washington State courts typically try to ascertain the fair market value of each item of property. “Fair market value” means the price that a reasonable buyer and seller would agree to in an arm’s length transaction in which neither was under any duress. For a house, that means getting it valued to see what a potential buyer would pay for it. For a car, that means looking it up on Kelly Blue Book.
For many assets, like checking accounts or retirement accounts, the value is determined simply by looking at the balance on a statement.
It can sometimes be difficult to determine the fair market value of certain assets, such as small businesses, professional practices, or some illiquid assets (i.e., an interest in a venture capital/private equity fund, art, or antiquities). In these instances, you or your attorney will retain valuation experts to ascertain their value.
When selecting a valuation expert, it is important to select someone that has both the proper qualifications (producing valuation reports for use in divorce is its own specialized area) and the ability to persuasively testify and present their opinion of value in the context of the divorce litigation (many CPAs have neither the experience nor the desire to testify in court). An experienced family law attorney will already know and have established relationships with relevant valuation experts.
Washington State Courts Have Broad Discretion Over Property Division
Once all separate and community property has been identified and valued, it is then possible to divide it equitably between the divorcing couple. Generally speaking, there is a starting presumption that each party will be awarded their separate property. In addition, there is a starting presumption that community property will be divided equally. However, Washington State courts have the authority to invade one party’s separate property and award it to their spouse. And they have the authority to make lopsided divisions of community property.
The factors affecting whether a court will award a lopsided division of community property or invade one spouse’s separate property include:
- the length of the marriage,
- the size of the separate property estate,
- whether and how much spousal support is awarded,
- whether one spouse makes substantially more income than the other spouse,
- the age of the parties,
- and whether one spouse has special health-related needs or limitations.
There is no formula for how a court weights all of these factors. Each divorce judge will endeavor to factor in the totality of circumstances when determining a fair division of property. Because this is necessarily a subjective exercise, it can be difficult to predict exactly what a court will do.
This is why experienced divorce attorneys are so valuable when making and evaluating potential settlements – there is no substitute for having the advice of an attorney who regularly sees how Washington State courts and individual judges handle property division.
Trust the Washington State Property Division Attorneys at S.L. Pitts
The divorce lawyers at S.L. Pitts have decades of experience helping clients in Seattle, Washington and Los Angeles, California resolve their property division disputes. If you have questions about community property, fair market value, retirement assets, marital debt, and other marital property, contact the property division attorneys at S.L. Pitts today. We can help to ensure that you get your fair share during the divorce process.