Probate in Washington

Chapter 3: No Will and Separate Property

Dan was single until he was 35. By then, he’d made quite a bit of money in a start-up business, and his parents were gone. They’d left him an apartment building, and their home, which was paid for.  Dan took out a mortgage to do major remodeling right after he inherited the home, since his own money was tied up in the business.   When he married Maryanne, she moved into the home. They lived there together for 15 years, pooling their earnings to pay for expenses including the mortgage. Dan had done some smaller remodeling by hiring help and using the income from the apartment building to pay for it. All along, Maryanne had been a good and faithful wife, a wonderful mother to their two children, now 12 and 14, and a perfect partner when it came to handling the apartment building. His sudden death at age 55 left Maryanne not only in an emotional blur, but in a financial bind.

They had never done Wills. I tell my clients this all the time: Everybody has a Will. The State of Washington wrote one for you. The Washington Will says this: first, your spouse gets all the Community Property, second your spouse gets 50% of your separate property and your children get 50% of your separate property. The children can take their shares in their own names when they turn 18. 

Maryanne, incorrectly, thought that she owned their home because she helped pay for the mortgage each month. And she thought she owned the apartment building and the business too. This is a Community Property state, correct?  So shouldn’t she own everything along with Dan?  Sadly, no.  Community Property is what is earned, while married, while living in the Community Property state. Marryanne didn’t own the home; Dan did. He took out the mortgage in his own name for a major remodel before they married, and he paid for the later upgrades with the income from the inherited apartment building. None of that was hers. She may have pooled her earnings to pay the mortgage, but that is considered “rent” from her. 

She also didn’t own the business as Community Property. There was no instruction about who should run it if he died. We had to ask the Court for permission to hire someone. 

Maryanne was in a world of hurt. The household income was cut in half, she’d have to go on paying the mortgage to live there. The home, the business, and the apartment building were owned 50% by her children. They were great kids now, but in a few years, they could turn into terrors and demand their share in cash. This was a true nightmare. We could help  Maryanne in a few ways. First, she was entitled to a Homestead Award. She’d get $125,000, whether it was equity in the home, or in cash.  It doesn’t matter that there wasn’t a Will that allowed that amount. Every spouse is entitled to the Homestead Award and the spouse gets it even if there are creditors. Second, she was entitled to a “family allowance” to keep things stable for a while. We’d apply to the Court on her behalf, asking for income from the apartment to be used to support the family temporarily, until things got sorted out. The Court will likely approve a reasonable request, but she’d have to reveal all her sources of income, including any life insurance that she had received. Those two things, the Homestead Award, and the Family Allowance, would be paid, despite any creditor claims that would come in.  Fortunately, there was some life insurance which Maryanne received quickly, in her own name, because Dan had designated her as the beneficiary. The creditors couldn’t touch that, and neither could the children.

The end result for Maryanne and her children was not likely what Dan would have wanted. He hadn’t replaced the Washington Will with his own. Because children can’t decide their own fate in these matters and because  Maryanne has interests of her own, the Court always appoints a Guardian ad Litem for them (an attorney to review things for the children’s best interests).  No final decisions about the buildings, the business or money can be made unless the Guardian ad Litem approves them. Now we had to negotiate with an outsider, as we tried to figure out how to solve the problems. Maryanne was able to use the Homestead Award and the life insurance to buy out the children’s interest in the home and pay off the mortgage. In the end, she owned the home. The business was sold. The kids had cash, and it would be held in “blocked accounts” (no access without Court Order) or trusts, and they would get their share when they demanded it as long as they were 18 years or older.  The apartment building would be owned by the children and Maryanne jointly. Maryanne was going to have to use her personal share of the money from the sale of the business to support the children.  Until they were 18, their share of the apartment income and the sale of the business would be put into the blocked accounts or trusts. Maryanne wouldn’t be able to sell the apartment or do anything major with it unless she had Court permission, because the children were part owners.

There is a more technical way that the Court would handle the assets of the children, but rather than give you the details, I only want you to see that the Court will get very involved in the things that are left to children, until they reach adulthood. The law books are full of stories of parents who took children’s shares and unfortunately, that bad history makes for tight control by the Courts, despite the fact that many parents would handle their children’s shares admirably. If you are caught in this scenario, do not take it personally. It’s not about you; it’s generic about all parents and guardians.