§ 4.18 NONPROBATE ASSETS
Upon the death of one of the spouses, various kinds of assets will not be subject to the jurisdiction of the probate court. Anderson v. Anderson, 80 Wn.2d 496, 495 P.2d 1037 (1972); Estate of Overmire v. Am. Nat'l Red Cross, 58 Wn. App. 531, 794 P.2d 518 (1990); see also RCW 11.02.005(15); RCW 11.10.040. Joint accounts with right of survivorship (see Chapter 5, § 5.05), United States Savings Bonds (see Chapter 3, § 3.02[8]), life insurance (see § 3.02[4]), and pension rights (see § 3.02[5]) are controlled by both statutory and contract provisions unique to each particular asset. This section is concerned with the effect at death of the use of community funds in creating the particular asset.
Since 1961, RCW 64.28.010 has authorized joint tenancy with right of survivorship in any kind of real or personal property. A writing or other evidence manifesting an intent of the spouses to convert their community property to joint tenancy property, thus changing the incidents of ownership, is required. See Lambert v. Peoples Nat'l Bank of Wash., 89 Wn.2d 646, 574 P.2d 738 (1978); see also In re Estate of Magee, 55 Wn. App. 692, 780 P.2d 269 (1989).
With the enactment of RCW 64.28.040 in 1985, joint tenancy interests held in the names of both spouses are presumed to be their community property. "Any such interest passes to the survivor of the spouse or survivor of the domestic partner as provided for property held in joint tenancy, but in all other respects the interest is treated as community property." RCW 64.28.040. Although the effect of the 1985 statute is to raise the presumption that joint tenancy property held by spouses is community property, it does not make it conclusive. An express recitation that the spouses intend to change the status of community property may establish a true joint tenancy between spouses. The effect of the 1985 statute in preserving the survivorship but retaining the community property characteristics otherwise amounts to a kind of "community property agreement" as to the particular asset. Chapter 11.10 RCW allows creditors to reach the asset upon death of the first spouse to the same extent that the asset was available during both spouses' lifetimes, so creditors would not be disadvantaged regardless of the characterization.
[1] Deposits
Devolution at death to deposits in financial institutions is controlled by the Financial Institution Individual Account Deposit Act, Ch. 30A.22 RCW. First enacted in 1981 as Ch. 30.22 RCW, the statute applies to banks, trust companies, mutual savings banks, savings and loan associations, and credit unions. RCW 30A.22.040(8). Succession to the balance of accounts held jointly, termed "joint account without right of survivorship" and "joint account with right of survivorship" in RCW 30A.22.040(10) and (11), is governed by RCW 30A.22.100, which provides as follows:
Subject to community property rights and subject to the terms and provisions of any community property agreement, upon the death of a depositor: . . .
(2) Funds belonging to a deceased depositor which remain on deposit in a joint account without right of survivorship belong to the depositor's estate, unless the depositor has also designated a trust or P.O.D. account beneficiary of the depositor's interest in the account.
(3) Funds belonging to a deceased depositor which remain on deposit in a joint account with right of survivorship belong to the surviving depositors unless there is clear and convincing evidence of a contrary intent at the time the account is created. . . .
Transferring property by deposit of funds in a joint account with right of survivorship could be considered quasi-testamentary as a method of disposition at death and not as creating a present joint tenancy. See RCW 30A.22.090; Morse v. Williams, 48 Wn. App. 734, 740 P.2d 884 (1987). Under the reasoning of Francis v. Francis, 89 Wn.2d 511, 573 P.2d 369 (1978) (decedent's share of community life insurance may be disposed of to third parties), the creation of a survivorship right in community property by one spouse in favor of a third person should effect the transfer upon that spouse's death of a one-half interest in the community property. However, in Chesnin v. Fischler, 43 Wn. App. 360, 717 P.2d 298 (1986), the court concluded that Munson v. Haye, 29 Wn.2d 733, 189 P.2d 464 (1948), required that a joint account in the names of the wife and her sister, created by the wife with community funds, had to be returned in its entirety to the community estate being administered upon the wife's death.
RCW 64.28.040 characterizes the joint tenancy interests in real property held by spouses. The interests are presumed to be community property. If the tenancy is severed, the property and its proceeds continue to be presumed to be community property. With respect to bank deposits, RCW 30A.22.090 and .100 cover questions of ownership during the lifetime and after the death of a joint depositor. Those funds deposited are subject, in both instances, to community property rights.
An attack against a joint account based upon community property principles can be made only by a spouse (or by a personal representative, heir, or beneficiary of that spouse). In In re Estate of Webb, 49 Wn.2d 6, 297 P.2d 948 (1956), a husband placed community funds in a joint account with his bachelor half-brother, who also had funds in the joint account. The half-brother was the first to die. The court upheld the ownership of the money in the account by the surviving joint tenant against the claim of the half-brother's heirs that the survivorship was nullified by the use of the survivor's community funds. The court stated the rule that where community funds have been deposited in a joint account with a right of survivorship in a person not a member of the community and the deposit agreement is in all other respects valid, the agreement will be given effect at least up to the point at which the rights of the survivor might have to yield to the superior rights of the surviving member of the community or the representative of the community estate under our community property law. Id. at 12-13.
Current provisions allow financial institutions to pay account balances to a surviving spouse upon receipt of a certified copy of a community property agreement "as recorded in the office of a county auditor of the state," together with an affidavit of the surviving spouse stating that the agreement was "validly executed" and was "in full force and effect upon the death of the depositor." RCW 30A.22.190(1). Although the statute is permissive, see RCW 30A.22.190 ("a financial institution may make payment"), it operates as a statute of acquittance. It appears doubtful that an institution could safely withhold the balance of a sole-depositor account from the surviving spouse entitled to it under a community property agreement containing a "third-prong" provision properly presented to the institution.
In addition, the current statute allows financial institutions to pay account balances not in excess of $2,500 to the surviving spouse, the next of kin, the funeral director, or "other creditor who may appear to be entitled thereto" when the payee proves that the death occurred and no personal representative has been appointed. The institution "may require such waivers, indemnity, receipts, and acquittance and additional proofs as it may consider proper." RCW 30A.22.190(2); RCW 30A.22.902 (applying references to...
