In a Washington divorce, inheritance will generally be considered separate property. What happens, though, when a spouse uses separate property to pay off the debt on a community asset? A Washington appeals court recently considered this issue.
According to the unpublished opinion, the wife bought a home in California while the parties were dating. The husband moved in with her a couple of months later. After they married in 2002, they formed a trust with the two of them as co-trustees. The trust stated that all property held in joint tenancy was their community property. The wife signed a quitclaim deed conveying the house to the two of them as trustees as community property. In 2013, they executed another quitclaim deed as trustees, this time transferring the property to the two of them as spouses “as joint tenants with rights of survivorship.”
They lived in the house together for 14 years and refinanced it at least three times. They both paid on the mortgage, but the wife ultimately paid it off in 2015 using funds she received from an inheritance. They sold the house in 2016. They then moved to Washington.