If you have signed or plan to sign a community property agreement, you may wonder how it will affect your estate plan. Depending on the specific language of the agreement, it could have a major effect on which assets become part of your estate.
What Is a Community Property Agreement?
Community property laws apply in only a few states, including California. Couples who are living in California or other community property states may be interested in signing community property agreements to affect disposition of property on divorce or death.
Without a community property agreement, any property acquired by either spouse during the marriage would be considered community property under the law. There are a few exceptions, such as property acquired by inheritance, gift, or exchange for other separate property.
Upon divorce, the couple’s community property would be divided between the spouses. Upon the death of one spouse, the other spouse would automatically inherit all community property without regard for what the will says. The deceased spouse’s separate property would pass to those designated in the will. If there was no will, then the surviving spouse would receive some or all of the separate property (depending on which other relatives the deceased spouse had).
In contrast, spouses who sign a community property agreement concur that all property acquired during the marriage will not be considered community property. Rather, the property will remain the separate property of whichever spouse acquired it.
Aligning Your Estate Planning With Your Community Property Agreement
As long as the agreement as a whole is legally valid, a community property waiver in a prenup or a postnup is valid. Some couples might sign separate community property agreements instead. If you have signed a separate agreement, a prenup, or a postnup, you should make sure that your estate planning is aligned with it.
For example, you may want to leave a larger proportion of your separate property to your spouse because you have waived your community property rights. Even if you started a business during the marriage, bought a house, or saved money, your spouse will not necessarily inherit it if you signed such an agreement. If your spouse also waived the statutory share of your estate, then he or she could be left with few resources after your death. As a result, consult an estate planning lawyer to determine how your estate plan should coordinate with your community property agreement to accomplish your wishes.
Planning your estate? Look to Janet Brewer, Esq. for thorough and thoughtful estate planning advice. Janet’s more than 20 years of legal experience will give you confidence and peace of mind. To schedule a “Get Acquainted” meeting, visit Janet's website or call her office at (650) 469-8206.