Property acquired during a marriage is presumed to be community property, but Washington property division attorneys know there are exceptions to that rule. Property that one spouse inherits or receives as a gift is presumed to be that spouse’s separate property. A Washington appeals court recently considered whether inherited property in another country became community property when the husband claimed to have paid taxes and bought out other heirs with community funds.
The couple married in 1985 and separated in 2014. The wife had inherited property in Peru that had been in her name since the 1990s. The husband argued he had built it up and bought out the other heirs. He said he had worked for one of the heirs to buy the property. He also argued that he paid $200 per year in property taxes.
The trial court found the property in Peru was the wife’s separate property by inheritance. The husband appealed, arguing the trial court had mischaracterized the property in Peru and therefore divided the property inequitably.
Property’s character is determined at the time it is acquired. There is a rebuttable presumption that property acquired during a marriage is community property, but property acquired as a gift or inheritance is separate property. If property is established as separate property, there is a presumption it remains such.
The husband argued the trial court erred in characterizing the property in Peru as the wife’s separate property because the court failed to apply the presumption that property acquired during the marriage is community property. The appeals court, however, noted that inherited property is presumed to be separate.
The husband further argued he had rebutted any presumption of separate property with clear and convincing evidence of commingling of separate and community property after the inheritance. He argued his use of community funds to pay taxes, pay for maintenance, and buy out the other heirs transformed the property into community property.
The appeals court noted commingling can create a presumption that the commingled funds are community property only if the funds are “hopelessly commingled and cannot be separated.” They have to be commingled to the extent that they can no longer be distinguished or apportioned. The appeals court found the payments were traceable to specific shares of the property.
The husband did not provide receipts, bank statements, or other evidence that showed which funds were used. The appeals court found he had not rebutted the presumption that the property was separate with clear and convincing evidence.
The appeals court also noted that the trial court had not made findings regarding the husband’s testimony about the alleged payments. The trial court had not made findings on the credibility of the testimony or on whether it had rebutted the presumption of separate property. Without these findings, the appeals court deemed the trial court to have found against the husband, who had the burden of proof. The appeals court affirmed the trial court’s order.
This case shows that inherited property will not necessarily be characterized as community property just because community funds were used to pay taxes or buy out other owners. To successfully show that inherited property has become community property due to commingling, the party must show that the commingling is such that it cannot be untangled. If the funds are still traceable, it is unlikely the court will find the property will be characterized as community.
If you are facing a divorce, a skilled Washington family law attorney can help you through the complexities of property distribution. Call the high-asset divorce attorneys at Blair & Kim, PLLC at (206) 622-6562 to discuss your case.
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