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Problems that can arise from a community property agreement

On Behalf of | May 7, 2020 | Estate Planning |

Many Washington state residents choose to bypass probate by leaving the entire estate to the surviving spouse. Depending on your circumstances, this arrangement, called a community property agreement, may not be appropriate for your estate.

These are the common issues that can occur with a CPA.

Administrative limitations

Although the spouse who dies first will avoid probate, the beneficiaries of the second spouse to die will have to go through the Washington probate process to settle his or her estate. If you own real estate outside of Washington, those properties must go through probate even when a CPA is in effect.

If you and your spouse die at the same time, such as in an accident, the court must decide what happens to your estate in the absence of a will or other estate planning documents.

Keep in mind that in Washington, a CPA takes legal precedent over other estate planning documents. If you have a will or trust, the court first reviews the CPA.

Financial limitations

If you expect to have debt at the time of your death, having a will protects your estate from creditors by limiting the claims period to four months. With a CPA, creditors can bring a claim against the estate at any time.

In addition, a CPA can affect eligibility for Medicaid and other government benefits for the surviving spouse. These programs are subject to both income limits and asset limits, which change each year to reflect the cost of living.

Familial limitations

When you have a CPA, it remains in place even if you and your spouse separate. If one of you then dies without first changing the agreement and/or finalizing your divorce, the surviving spouse would still get everything.

If you and your spouse have children, you cannot provide for them within the confines of a CPA. This is not the best estate plan if you want to leave gifts to children and grandchildren.

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