What You Need to Know about Community Property and Ademption
Transcript:
Jonathan: Hello, I'm Jonathan Barlow, a Partner Attorney at Clear Counsel Law Group. Here at our law firm, we do quite a bit of estate planning, we create wills and trusts for people. Important concept to understand with doing this is called community property. Nevada is one of a fairly large handful of states that applies this principle of community property.
What is community property? Essentially what it is, the law presumes that after a couple is married, any assets they acquire after marriage are treated as community property, meaning that both spouses have an equal interest, ownership interest in that asset. This would apply even if after the spouses are married, a house is purchased in just the husband's name. Even if the deed says this house belongs to Bob as his sole and separate property, the law would still presume, because the house was acquired after marriage, that the wife also has an equal interest in that property. It's important principle to understand when you're helping somebody prepare a will or a trust, or when you're thinking about a will or trust. What intent do you have as far as community property? Do you intend to be treated as community property? It's a common question that comes up as we're sitting down with our clients, and I think my assistant, Brian, had some questions about community property.
Brian: Is there a way for a spouses to have property that's not community that's purchased after the marriage? Are they able to make an agreement similar to a prenuptial agreement?
Jonathan: That's a good question. A prenup, as you commonly hear, is something that people sign before they're married that deals with hey, this is how we're going to own our property. If you have the presumption in the law of community property, meaning that both spouses have an interest, how do we get around that, so to speak, or if the spouse's intent to not have an equal interest for using the example where they purchase the house in just the husband's name, how do we get around that to make sure that they agree that yes, absolutely, after the marriage, the spouses can sign a written agreement that says we intend to have this asset be held in Bob's own name as his sole and separate property.
Yes, it does usually require a written agreement where both spouses sign it and agree to own one property or some asset as separate property, and that would change the nature of community property. There are also some other interesting exceptions to the community property rule. For instance, after marriage, let's say, Brian, you inherited something from your father's estate. An inheritance, even though received after marriage, would be treated as your separate property. It's an interesting exception to the community property role. Any other questions about community property that I can answer for you?
Brian: Often, when I hear about community property, I hear the term ademption. If you could clarify it, it would be helpful.
Jonathan: Sure. Ademption is an interesting concept in estate planning. Ademption means if you put into a will or a trust or you say, for example, I give my house at 123 Anywhere Street to Brian, and then after you die, you no longer own Anywhere Street. Sometime in between the signing of the will and your death, you've actually sold Anywhere Street and you don't own Anywhere Street anymore, but in your own, you had specifically given 123 Anywhere Street to Brian. What happens to that gift? The general rule of ademption means because that specific gift no longer is in existence, you don't own Anywhere Street, that gift is deemed adeemed or it goes away, in other words. You no longer get that gift.
There are some exceptions to ademption where Brian might still get 456 Elsewhere Street that you currently own at the time of your death, but that gets a little bit dicier and you have to be careful when you're doing estate planning to say what you mean and mean what you say when you're giving specific gifts. Otherwise, worst case scenario, you would have a situation like ademption apply where somebody's not getting a gift that you really intended for them to get.
When spouses sit down and they're doing this analysis of what's community property, what's separate property, we want to make sure that ademption doesn't apply. We want to make sure that when we give this gift, it goes to the person we intended it to go to. You want to make sure that you're very careful about how you write that in your will or your trust so that you mean what you say and say what you mean in your will. I encourage you to talk to a good estate planning attorney, we have several of them here at law firm at Clear Counsel Law Group, but they will always be able to understand these principles and these issues in helping you with your estate planning.
