Effect of Spouse’s Death on Community Property
Community property is the property in which a married couple has joint ownership. Usually, the assets jointly purchased and earned during the existence of the marriage are considered community property and a married couple share equally in community property.
The law relating to inheritance of a community property on the death of a spouse varies from state to state. Inheritance of the community property depends on the survivors of the deceased spouse. According to a certain state’s law, a community property will be inherited by a surviving spouse, if there are children in the marriage. However, if the deceased person has children in a former marriage the surviving spouse will get only half the share of the community property. Children from the former marriage take half of their parent’s share in the community property. Under some state laws the property vests on the surviving spouse after paying of community debts[i]. Whereas, some statutes provides for the surviving husband to take all the community property but a surviving wife is to take only one half of the community property. If a spouse kills the other spouse s/he will not be permitted to profit from the wrongdoing. In such case, the property derived pursuant to the death of the spouse won’t be treated as community property. Only community property owned before the death of the spouse will be treated so to determine the murderer spouse’s share in the community property[ii]. Generally, a putative spouse is treated as a legal spouse and is entitled to community property. Also a putative spouse is considered in a probate proceeding[iii].
Under the Uniform Disposition of Community Property Rights at Death Act, upon the death of a spouse, half of the community property is considered the property of a surviving spouse and the other half is considered as the deceased spouse’s property. Only the property of the deceased spouse is subject to distribution under the state laws on succession[iv]. The rights of creditors with regard to the property are not affected by the Act[v]. However, a couple is free to change their interests in the property[vi].
On the other hand, if a couple had created an estate plan, the terms of the plan will apply in the inheritance of the community property. An estate plan will prevail over the community property laws. Proper estate planning during the life time of the couple will help in avoiding disputes relating to distribution of community property. Also an agreement can be entered between spouses regarding community property which states all the community property belongs to the surviving spouse on the death of the first spouse to die. If a person intends to give his/her share in the community property to some others, other than the surviving spouse, s/he will have to make a will to that effect.
Community property issues arise in disputes after the death of a spouse. All issues in dispute are settled through probate proceedings. Control over the entire community property will be subjected to the jurisdiction of a probate court for administration and settlement of the estate. Then, the entire community property including both half shares owned by the surviving spouse is regarded legally as part of the deceased’s estate until the completion of the proceedings in the probate court[vii].
According to some state statutes, a general administration of the community property is required when either spouse dies but under certain state statutes, general administration is required only if the wife is the surviving spouse. The purpose of administration is to determine the community property obligations and also to distribute the property between the surviving spouse and the heirs of the deceased spouse. Until a court places the property in possession of the surviving spouse, a succession representative of the deceased spouse has authority to administer a surviving spouse’s share in the community property[viii]. A court appointed administrator has the power to sell the property by the order of the court without the surviving spouse being a party to the court[ix]. Under certain state statutes, administration is unnecessary if either spouse dies without children[x].
In several states, certain type of a community property is not required to undergo probate proceedings. It is known as ‘community property with right to survivorship’. Such community property belongs to the surviving spouse, on the death of a spouse, without any probate proceeding.
Community property is subject to certain liabilities and obligations after the death of a spouse. Generally, all community debts of the deceased spouse are required to be cleared from the community property. Some state statutes require the property to bear the funeral expenses, medical expenses, and the cost of administration expenses. After meeting the payment of the deceased spouse’s debts and the expenses of administration assigned between the community and separate property, a surviving spouse will be eligible to half of the remaining community property[xi].
Certain statutes provide for family allowance or widow allowance from the property of a deceased spouse. A widow’s allowance provided under a statute will have to come out of her husband’s individual estate. The assets of a partnership that is liquidated by the husband’s surviving partner are not subject to the widow’s allowance. A widow will have a right only in the property that remains after the completion of administration of the partnership assets[xii].
The right of election is available to a widow under some state statutes to elect between legally entitled community property and property under the will of the husband[xiii].
Certain state statutes require the surviving spouse to become a ‘qualifying survivor’ by following a statutory procedure in order to get the right to sell the community property which s/he does not own. But a surviving spouse may sell the property to pay community debts without becoming qualifying survivor under statute[xiv]. Generally, when a surviving spouse sells the property it will be subject to lower federal capital gain taxes.
If contributions are made with community property during marriage, to a pension or annuity then proceeds are subject to apportionment on death of a spouse as it is partly community property and separate property.
[i] Peterson v. Peterson, 35 Idaho 470 (Idaho 1922)
[ii] Castro v. Ballesteros-Suarez, 222 Ariz. 48, 55 (Ariz. Ct. App. 2009)
[iii] Estate of Leslie, 37 Cal. 3d 186 (Cal. 1984)
[iv] The Uniform Disposition of Community Property Rights at Death Act § 3
[v] The Uniform Disposition of Community Property Rights at Death Act § 7
[vi] The Uniform Disposition of Community Property Rights at Death Act § 8
[vii] Estate of Herring, 983 S.W.2d 61 (Tex. App. Corpus Christi 1998)
[viii] Prejean v. First Mississippi Corp., 506 So. 2d 885 (La.App. 1 Cir. 1987)
[ix] Estate of Herring, 983 S.W.2d 61 (Tex. App. Corpus Christi 1998)
[x] Spence v. State Nat’l Bank, 294 S.W. 618 (Tex. Civ. App. 1927)
[xi] Estate of Hirsh, 122 Cal. App. 2d 822 (Cal. App. 1954)
[xii] In re Ross & Waldo’s Estate, 149 Kan. 168 (Kan. 1939)
[xiii] Land v. Marshall, 426 S.W.2d 841 (Tex. 1968)
[xiv] Grebe v. First State Bank, 136 Tex. 226 (Tex. 1941)