Transmutation Agreement
(Recharacterization of Property) (WA)

Summary

This template is an agreement that may be used to transmute separate property to community property or community property to separate property for a married couple or persons in a registered domestic partnership in Washington. This template includes practical guidance, drafting notes, and alternate and optional clauses. Property agreements are often prepared to clarify the status of property before it is transferred to a revocable living trust, or held in connection with the preparation of a will. This is especially important for property held in joint tenancy, because difficult issues can arise as to whether the property is truly joint tenancy property or community property. When an estate contains both separate property and community property, and there are children from prior marriages or partnerships, an agreement characterizing the assets as separate or community can help prevent subsequent disputes between the surviving spouse or partner and the children of the deceased spouse or partner over what property is included in the estate of the deceased spouse or partner. Careful discussion with clients is vitally important to explain the consequences of the transmutation of the character of property in the areas of liability for debt between the parties, management in case of disability, treatment in the case of divorce, and upon death. Be mindful of gift tax implications if the transmutation involves registered domestic partners or alien spouses as they do not qualify for the marital deduction. You should advise the parties that they each have the right to separate legal representation and review by independent counsel prior to executing the agreement, and you should carefully document such disclosure and explanation in writing. Furthermore, the parties should be advised that the general rules applicable to fiduciary relationships between persons with whom occupy confidential relationships with each other are applicable. This template assumes that specified items of property will be recharacterized as the community property of the parties. Additionally, there are optional provisions to recharacterize certain items of community property as the separate property of one party and the separate property of one party to the separate property of the other party. Some degree of customization may be necessary. For a marital property agreement that may be used to characterize all property owned by the spouses or partners as community property, see Community Property Agreement (WA). For a template agreement characterizing certain items of property as separate or community property, see Property Characterization Agreement (WA).