Washington Community Property: a Mediator’s Guide to 15 Factors that Affect Settlement

Yes, Washington is absolutely a community property state. This means when you get married in Washington, you’re creating what the law calls a “marital community.” Think of it as forming a financial partnership where most of the property acquired during the marriage belongs equally to both partners – even if only one spouse’s name is on the paperwork.

What is quasi-community property?

Quasi-community property can take a few forms, such as property owned by non-married couples. But since we’re talking about community property and divorce, here’s a more applicable example of the concept.

Let’s say you and your spouse lived in Illinois (which isn’t a community property state) for ten years before moving to Washington. During those years in Illinois, your spouse’s name alone was on the title to your family home (which you continue to own as a rental property) and on their retirement accounts. In Illinois, those assets may be considered separate property had you remained living there and gotten divorced. But in Washington, those assets would have been considered community property if you had acquired them here – despite whose name is on the paperwork.

That’s where quasi-community property comes in — it allows Washington to treat those assets as if they had been acquired in Washington, giving both spouses fair consideration in their property division.

When dividing assets during a divorce, some couples may choose to work with family law attorneys who will decide each party’s community property interest and how it’s divided. However, as a mediator, I often find that couples can achieve a fair distribution of their marital assets and debts more efficiently and cost-effectively through mediation than through an attorney-driven divorce or traditional litigation.

While both approaches can lead to a fair and equitable distribution of property, mediation typically offers more flexibility in how your marital property is divided. Instead of having a third-party stranger dictate the terms, you and your spouse work together to create a community property agreement that reflects your unique circumstances. And does so in a fraction of the time, and for a fraction of the cost versus you each hiring a law firm to represent you and litigate!

When does community property end in Washington state?

Community property rights generally continue until the date of separation, which is typically (but not always) when one spouse files for divorce or legal separation and communicates their intent to end the marriage and takes action to do so. This isn’t always as clear-cut as people think – sleeping in separate rooms or privately considering divorce doesn’t automatically establish a date of separation. In mediation, we work to establish this date right away as the legal date of separation can (and will) significantly impact property division.

Understanding debts in property division

While clients certainly like to talk about the assets that need to be divided, unfortunately for them, debts acquired during marriage must also be addressed. While community debts are typically shared equally unless otherwise agreed to by the parties, separate debt (debt acquired before marriage or through separate property) usually remains the responsibility of the individual spouse. However, when dividing assets and debts, we in mediation (or the Washington courts if you choose to litigate) consider each spouse’s economic circumstances to ensure a fair division of both assets and obligations.

Is Washington a 50/50 divorce state?

While Washington is a community property state, this doesn’t mean every single item of community property needs to be divided exactly 50/50 or that more property must go to one spouse over the other. What it really comes down to is the method you use to get your divorce and what you both think is fair.

On the one hand, were you to both hire attorneys and litigate your divorce proceedings, there’s an excellent chance that a judge decides you should share everything equally.

But in mediation, Washington couples decide if the overall division of community property is fair and equitable. Sometimes, this equitable division does result in a 50/50 split. Whereas other times it means one person keeps certain assets while the other gets assets of similar (but not necessarily equal) value.

Let’s now understand what property we need to focus on in your divorce. The key is knowing the difference between community property and separate property. Why? Because only community property will be divided during the divorce process. Let me explain some basic concepts that will help you understand how we make these distinctions.

What is split characterization?

Split characterization is exactly what it sounds like — when a single piece of property has both separate and community property components. This happens more often than you might think, and it’s one of those concepts that are much clearer with an example.

Let’s say you were making payments on your condo for five years before getting married. After marriage, you continued making payments for another ten years using money earned during the marriage. This condo would have a split characterization — part separate property (representing your equity before marriage) and part community property (representing the equity built during marriage from community funds).

How does tracing work?

Think of tracing like following a trail of breadcrumbs through your financial history. It’s how we track where money came from and where it went, especially when we need to figure out if something is separate or community property.

I common example I often use goes something like this: imagine you had $50,000 in a savings account before marriage (separate property), and you used that money to make a down payment on a house during your marriage. To maintain your separate property claim on that portion of the house’s value, you’d need to be able to “trace” that $50,000 from your pre-marriage account all the way to the house purchase.

Are inheritances community property?

Inheritances are typically not considered community property in Washington state, even if you receive them during marriage. However (and this is important), how you handle that inheritance can affect whether it stays separate property.

For example, if you inherit $100,000 and keep it in a separate bank account that only you use, it remains your separate, personal property. But if you deposit that inheritance into a joint account with your spouse and use it to pay for family expenses, it might become community property through transmutation / commingling.

Who gets the house in a Washington divorce?

One of the most emotionally charged questions in any divorce is what happens to the family house. In my years as a mediator, I’ve found that the answer depends on your unique situation and several key factors we need to consider together.

First, we need to determine whether the house is community or separate property. This affects what options are available to you. We also need to think about any children involved – maintaining stability for kids is often a top priority in these decisions, especially when child support is a factor. Another crucial factor is whether either spouse can realistically afford to keep the house, considering mortgage payments, maintenance costs, and other expenses. Finally, we look at what other assets and debts are available that might be used to offset the house’s value.

When it comes to the family home, I’ve helped couples find several creative solutions. Many choose to sell the house and split the proceeds – while this is often the cleanest solution, it’s not always what works best for everyone. Another common approach is to get the property valued and for one spouse to buy out the other spouse’s interest, which can work well if there are enough assets or financing available to make it happen. Some couples, especially those with children, opt for a deferred sale arrangement where they continue co-ownership for a set period, often until their children graduate from high school. And sometimes, we can arrange a trade-off where one spouse keeps the house in exchange for other assets of similar value.

How do support payments affect property division?

When working through property division, it’s important to consider how spousal maintenance (alimony as it’s commonly called) might impact the overall settlement. The division of assets and debts often interplays with support obligations, as one spouse’s economic circumstances may affect their ability to maintain their standard of living post-divorce. A fair division of property which has a couple’s property divided in a “fair but not necessarily equal” manner, might help reduce or eliminate the need for ongoing spousal maintenance in some cases. In mediation we call this a lump sum alimony buyout.

How are business interests handled?

Business ownership often presents unique challenges in property division. If you or your spouse owns a business, we need to consider several factors. We’ll look at when the business was started – was it before the marriage or during? We’ll examine how much the business grew during your marriage, and whether both spouses contributed to its success, either directly or indirectly. These factors help us determine what portion of the business is community property and how to fairly address it in your property division.

What about retirement accounts?

Remember before when we talked about split characterization? Retirement accounts are a prime example of this. While the portion of retirement benefits earned during your marriage is considered community property, any portion earned before marriage remains separate. This often leads to some complex calculations, and couples will typically need to use a special court order called a Qualified Domestic Relations Order (QDRO) to divide these accounts properly without triggering unnecessary taxes or penalties.

How do taxes impact our divorce settlement?

While transfers between spouses during divorce are usually tax-free, there are still important tax implications to consider. For instance, if you’re selling property, you’ll need to think about potential capital gains taxes. When dividing retirement accounts, we need to carefully consider how future distributions will be taxed. Understanding these tax implications helps us make more informed decisions about how to divide your property fairly.

Understanding community property in Washington state doesn’t have to be overwhelming. While the legal framework can seem complex, working with an experienced mediator can help you navigate the process efficiently, create fair and lasting agreements, save money compared to litigation, maintain better relationships, and achieve outcomes that work for everyone.

Remember, while Washington law provides a framework for property division, you and your spouse have the power to create a division plan that works for your unique situation. Through mediation, you can develop creative approaches that address both parties’ needs while ensuring compliance with Washington state law. Whether you’re dealing with complex assets or simple property division, mediation provides a path to resolution that’s typically faster, less expensive, and more satisfying than going to court.