Property Division

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?

Under Washington State community property law, marriage is essentially analogized 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 assets you acquire all belong to your separate estate. Once you get married, however, your income and the property you buy with it belong to the marital community. Just as a partner in a business labors on behalf of the partnership, the married spouse now labors on behalf of the marital community.

In Washington courts, it usually doesn’t matter how assets are titled. Often, what matters most is when an asset was acquired. If property was acquired during the marriage, Washington law almost always presumes it to be 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, an inheritance, or income derived from a separate property asset).

This principle frequently surprises couples across Seattle and King County. Spouses will often maintain separate bank accounts during their marriage, assuming that holding their earnings in individually titled accounts keeps that money separate. Under Washington law, this arrangement does not preserve or create separate property. Indeed, to the extent that marital earnings are deposited into an account that existed prior to marriage, any separate funds will likely be deemed “commingled” with post-marital deposits and transmuted into community property.

If you have a premarital agreement (commonly referred to as a “prenuptial agreement” or “prenup”), however, it can supersede some or all of Washington’s community property laws. The Seattle family law attorneys at S.L. Pitts are skilled at drafting and evaluating existing agreements during the separation or divorce process to protect the financial interests of clients throughout Seattle, Bellevue, and the greater Puget Sound area.

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 Seattle Property Division Attorneys at S.L. Pitts

The divorce lawyers at S.L. Pitts have decades of experience helping clients across the greater Seattle and Puget Sound 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.

Frequently Asked Questions About Property Division

How is marital property divided between spouses during a divorce?

Under RCW 26.09.080, marital property is divided in a ‘just and equitable’ manner based on the nature of assets, economic circumstances, and marriage length.

What is the difference between community property and separate property in divorce?

Community property encompasses assets and debts acquired during marriage through spousal effort; separate property includes premarital assets, inheritances, and gifts.

How do courts determine if an asset was acquired during marriage?

Courts rely on acquisition dates, financial statements, escrow documents, and the general statutory presumption that all assets acquired during marriage are community.

What happens if separate funds are commingled with joint bank accounts?

Commingling separate funds into joint accounts makes tracing difficult; without clear documentary evidence, the funds are presumed transmuted into community property.

Can premarital property become community property over time?

Yes, premarital property can become community property through express written transmutation, joint re-titling, or extensive commingling with marital funds.