The Importance of Administering Your Spouse or Domestic Partner's Estate
In the wake of a spouse or domestic partner’s passing, the last thing on a person’s mind may be dealing with the legalities of administering their loved one’s estate. Whether the decedent left behind a will, or died intestate, the decedent’s property will often pass entirely to the survivor. When the decedent’s entire estate passes to the survivor, it can be easy enough for the survivor to continue on without engaging in any sort of estate administration, much less a formal probate process. With that said, failing to administer a late spouse's or domestic partner’s estate can result in significant issues down the road, particularly with regard to real estate and other titled assets.
Commonly, when a spouse or domestic partner passes away, the surviving spouse or domestic partner will fail to transfer title to their residence (or other real estate or titled asset) to the survivor’s name alone. If the survivor later wishes to sell the house, or passes away, the fact that the deceased spouse or domestic partner’s name is on title will prevent the sale or transfer of the asset. In all likelihood, a probate will need to be opened to administer the first decedent’s estate. The beneficiaries of the survivor’s estate will need to open a probate for the first spouse or domestic partner, just to transfer title to the surviving spouse’s estate, so that the survivor’s estate can be properly administered. This creates an extra burden on the second decedent’s beneficiaries (often the children of the spouses or domestic partners) that could have been avoided by properly administering the first decedent’s estate.
Not only does administering a spouse or domestic partner’s estate save work for the survivor’s eventual beneficiaries, it helps provide a tax benefit as well. When a spouse or registered domestic partner passes away, the decedent’s separate property and all community property of the spouses or registered domestic partners gets a step-up in basis to its date of death value for capital gains tax purposes. Administering the decedent’s estate provides an opportunity to prepare an inventory and document the value of all estate-owned assets. When an asset is later sold, the inventory can be used as a reference to make tax reporting easier.
There are many benefits to probating your loved one’s estate, even when it is possible, avoid doing so. In some cases, probate is avoided because of a misconception that probate is costly or time consuming. With Washington’s nonintervention probate process, for simple estates this is not necessarily the case. Even so, spouses or domestic partners may wish to make their estate administration as easy as possible on the survivor. If a couple’s estate plan is for everything to pass outright to their surviving spouse or domestic partner, a Community Property Agreement can be used to simplify their estate plan and make estate administration easier on the first death. Upon the first death, a Community Property Agreement is simply recorded along with a Death Certificate and that is sufficient to transfer title. Probate can be avoided entirely.
If you need help administering a loved one’s estate or are interested in simplifying your estate planning with a Community Property Agreement, we at Stokes Lawrence would be happy to assist. Please contact a member of the Stokes Lawrence Estate Planning Group.