Seattle Attorneys Blog
In many Washington divorce cases, characterization of property as separate or community can be a contentious issue. A property’s character is determined when it is acquired. Property that is established to be separate is presumed to remain separate unless there is sufficient evidence to show the intent to convert it to community property. Separate property can only be changed to community property if there is clear and convincing evidence of the spouse’s intent to convert it. Intent to convert property can be shown through a quitclaim deed, but there is not a presumption that a change in title from one spouse to both spouses converts property to community property. If a quitclaim deed has a stated purpose of establishing community property, the court can consider extrinsic evidence in determining intent. A husband recently challenged a court’s characterization of a house he bought before the marriage as community property.
According to the appeals court’s unpublished opinion, the husband had purchased the home while he was single. He refinanced it during his first marriage and signed a quitclaim deed to himself and his first wife. He divorced his first wife in 2010 and he agreed during the divorce that the house was community property. He refinanced the house to remove his first wife’s name and pay her share of the community property as part of the divorce settlement.
The Trial
The parties got married in 2011. Both had been married before and had children and separate assets. Three of their six bank accounts were joint. Additionally, they had a joint investment account. The husband testified he used the parties’ paychecks and the wife’s child support payments to pay the family’s debts. He said they combined and commingled their accounts early in the marriage.
The husband testified that he paid the bills and kept track of their finances. He said the wife did not pay attention to their finances or help him budget. He testified he paid the mortgage and other bills from a joint account.
The wife testified the husband wanted to combine finances right after they married. She put his name on all of her accounts and added him to her rollover IRA. She testified that she did not look at their records or transactions because the husband managed the finances.
The husband testified he refinanced the house for $195,000 in 2020. A deed of trust and a quitclaim deed were both prepared. The quitclaim deed included the following language: “for and in consideration of To establish community property.” The husband testified he had not intended to make the house community property. He said he refinanced to get a lower interest rate. He said he just signed the documents he was given and did not realize the wife’s name was on the deed.
The court found that the home “started as a separate asset” but the husband’s intent was to convert it to separate property when he signed the quitclaim deed. The court identified the factors it considered in reaching this finding: the length of the marriage at the time the deed was signed, the parties’ commingling of funds and use of the wife’s resources to help pay the mortgage, the husband’s previous experience in converting his separate interest in the property to community interest with a quitclaim deed, and his prior actions and “meticulous handling of financial affairs.” The court found his testimony that he did not understand what he was signing was “not very credible.”
The trial court concluded the house was community property and awarded it to the husband, but ordered him to make an equalization payment to the wife.
The Husband’s Appeal
The husband appealed the characterization of the house.
The husband argued the court had not applied the presumption that separate property remains separate unless it is shown there was intent to convert it to community property. He argued the trial court had not acknowledged the presumption.
The trial court had mentioned in its oral ruling that “the house started as a separate asset.” The court stated his intent was to turn it into community property. The appeals court noted there was no indication the court had not recognized or applied the presumption.
The husband also argued the court erred in relying on the quitclaim deed to determine his intent, citing to previous opinions by the Washington Supreme Court. The appeals court noted those cases did not state that the language in the quitclaim deed cannot be considered in determining intent.
Challenged Findings of Fact
The husband also challenged the court’s findings of fact. He challenged the findings that the parties’ finances “intentionally comingled. . .” and that “[t]he parties had comingled funds.”
The appeals court noted that three of the parties’ six bank accounts were joint. They also had a joint tenancy investment account. The wife had testified she added the husband to her IRA account and that he had made contributions to it from their joint account. The husband had testified he paid the mortgage and other bills with money from both parties’ paychecks and the child support received by the wife. He had been asked during cross-examination if the parties “had decided to consolidate and comingle [their] financial accounts,” and answered “Yes.”
The appeals court concluded there was sufficient evidence to support the court’s findings related to the comingling of funds.
The husband also challenged the court’s finding that he “primarily managed the family’s financial affairs.” The husband had testified the wife was included in financial decisions and made debit and credit card transactions. He also testified, however, that he wrote the checks and made transfers to pay bills. The wife testified the husband managed paying the bills and had access to all her accounts. They would talk about what they were spending, but the wife did not feel a need to look at their transactions or bank records. The appeals court concluded the evidence was sufficient to support the trial court’s finding the husband primarily managed the financial affairs.
The appeals court rejected the husband’s challenge to the court’s finding the parties “were married for quite some time when the Quit Claim Deed was signed.” The appeals court noted the parties had been married nearly nine years at the time, and concluded “a rational, fair-minded person would consider nine years as ‘quite some time.”
The husband also challenged the court’s finding he had previous experience converting separate interest to community interest through a quitclaim deed, as well as the finding his testimony that he did not understand what he was signing was not credible. The appeals court concluded the husband’s own testimony that he had put his first wife’s name on the house through quitclaim deed with intent to create community property was sufficient to support the finding he had prior experience. The appeals court declined to substitute its own judgment for that of the trial court with regard to the credibility finding.
The husband also challenged the court’s finding he had intent to convert the separate property to community property. The trial court had not just relied on the fact the wife was added to the title, but also relied on the language in the quitclaim deed stating a purpose of establishing community property. The court also stated the additional factors it considered. The appeals court concluded the language in the quitclaim deed and other factors cited by the trial court were sufficient for the trial court to find it was highly probable he intended to establish the house as community property. The appeals court concluded the substantial evidence supported the court’s finding he had intent to convert the property from separate to community.
The appeals court affirmed the trial court’s characterization of the house.
Call Blair & Kim, PLLC
Characterization of property can have a significant effect on the division of property. If you are facing divorce and there were pre-owned assets, a skilled Washington family law attorney can advise you and help you protect your assets. Set up a consultation with Blair & Kim, PLLC, at (206) 622-6562.