California is a community property state. This means that unless a married couple specifies otherwise, property acquired during their marriage belongs to both spouses. (There are some exceptions, such as property inherited by one spouse from someone else.) Accordingly, when one spouse dies, his or her estate owns one-half of any community property belonging to the couple, while the surviving spouse retains ownership of the other half.
Married couples should discuss how to dispose of their community property as part of the estate planning process. It is important for one spouse not to unilaterally dispose of such property, especially when both spouses are still alive. In fact, California law expressly prohibits a spouse from giving away community property “for less than fair and reasonable value” without the written consent of the other spouse.
Failure to follow this rule can lead to complicated litigation after a spouse’s death. Here is a recent example which is discussed for informational purposes only and should not be considered an accurate statement of the law. This case arises from the aftermath of a tragic 2009 incident. A woman murdered her daughter and grandchildren before killing herself. The daughter was estranged from her husband at the time of her death. We previously discussed a California court decision from last August dealing with the daughter’s estate.
The present case directly involves the mother’s estate and her former son-in-law. It also implicates the wife’s estate. During the couple’s marriage, the husband and wife purchased a Lexus automobile using funds from their joint checking account. The Lexus was therefore community property. The couple separated in 2008. The following year, the wife and the couple’s children relocated from California to Texas. At that time, the wife took the Lexus and demanded the husband “remove any claim” to the vehicle.
In 2008, the wife unilaterally filed a change of title with the California Department of Motor Vehicles, purporting to transfer the Lexus to her mother. At the time, the daughter states she was making a “gift” of the car to her mother. The husband was not aware of this transfer until after the mother and daughter’s deaths in December 2009.
The husband subsequently filed a petition with the probate court overseeing the mother’s estate. He argued the gift of the Lexus to the mother was void under California law. The probate court agreed. The court did not immediately return the car to the husband, however; rather, it held the car was properly part of the daughter’s estate, which was not a party to this case. The husband will therefore need to separately litigate against his wife’s estate.
It is important to note just because a couple may be estranged or separated, that does not entitle one spouse to simply give away community property to keep it from the other spouse. Unless and until a couple obtains a divorce decree, which includes a court order dividing any community property, each spouse is legally obligated to maintain said property.
Of course, a pending divorce should prompt a reconsideration of any estate planning arrangements previously made by each spouse. If you need advice from a qualified California estate planning attorney on how to deal with community property in your will or trust, contact the Law Office of Scott C. Soady in San Diego today.