For spouses and married couples who have accumulated substantial assets, the division of their property takes on heightened importance during the divorce process. This is true not only in terms of protecting as much wealth as possible, but even in terms of identifying the assets that are on the table and determining how they should be valued for purposes of the divorce.

Washington is a “community property” state. This means that most (but not necessarily all) assets spouses acquire during their marriage are subject to division in their divorce. In Washington, divorcing spouses must divide their community property “equitably” (not necessarily equally), while each spouse is entitled to keep the assets that qualify as his or her “separate property.”

When Does an Asset Qualify as “Community Property” That Is Subject to Division in a Divorce in Washington?

As a general rule, the date of marriage is the dividing line between separate and community property. If you own an asset before you get married, it is yours to keep when you get divorced. If you acquire an asset during your marriage, it becomes community property and must be divided equitably during the divorce process.

However, there are a number of exceptions, and there are some special rules that tend to be particularly relevant in high asset divorces. For example, the following assets may qualify as separate property even if acquired during a couple’s marriage:

Gifts from one spouse to the other;
Inheritances from family members (if left to one spouse individually); and,
Assets covered by a prenuptial or postnuptial agreement.

Likewise, assets owned prior to the date of marriage can take on community property characteristics in some cases. For example:

Retirement and investment accounts opened prior to the date of marriage can have both separate and community property components if additional contributions are made during the marriage.
Appreciation in value of retirement accounts, investment accounts, and other assets owned prior to the date of marriage can become community property in some cases.
Using community assets to pay separate secured debts (e.g., debts incurred prior to the marriage) can give both spouses an ownership interest in the encumbered property.
If one spouse owns a business on the date of marriage and both spouses contribute to the business during the marriage, then a portion of the business may be classified as community property for purposes of their divorce.
If a prenuptial or postnuptial agreement provides that certain assets should be treated as community property even though they were acquired prior to the date of marriage, then they will be treated as community property.

What Does It Mean to “Equitably” Divide a High-Asset Couple’s Community Property?

One of the biggest questions many high-asset spouses have about the divorce process is: What does it mean to “equitably” divide a married couple’s community property? The short answer is: “It depends.”

While equitable does not necessarily mean equal, in many cases, it will be appropriate for divorcing spouses to equally divide their community property. This could be the case, for example, if both spouses have or will have similar incomes moving forward. In this scenario, it would make sense (and be considered “equitable”) for each spouse to receive an equal share in their divorce.

What Is the Process for Dividing Community Property during a High-Asset Divorce in Washington?

There are several steps involved in the process of equitably dividing community property in a high-asset divorce. Given the flexibility spouses have when it comes to how they choose to pursue their divorce (e.g., through private negotiations or collaborative law, in mediation, or in court), there is no single straightforward path for dividing community property. However, there are some steps that will need to be taken, regardless of the method(s) used. These include:

Identifying All Separate and Community Assets – The first step is to determine which assets are subject to division in the divorce. This involves taking an inventory of the couple’s entire estate and accurately identifying each asset as separate or community property.
Valuing All Community Assets – Once all community assets have been identified, they then need to be valued. Divorcing spouses do not necessarily need to obtain an appraisal for every single dish and every piece of furniture, but may be necessary to obtain formal valuations for homes, businesses, collections, vehicles and boats, and other high-value assets.
Determining What Constitutes an “Equitable” Distribution – Before they can begin to divide their community assets, divorcing spouses must first determine what constitutes an “equitable” distribution under the circumstances of their divorce. This can be done by mutual agreement through negotiations, collaborative law, or mediation; or, if necessary, the spouses can ask a judge to render a decision.
Deciding How to Equitably Divide Community Assets – After determining what constitutes an equitable split, then comes the process of actually dividing the community estate. This can take anywhere from days to months, with the duration of the process depending heavily on the size of the estate and the extent to which both spouses have a desire to keep the same items of community property.
Considering Alimony, Tax, and Other Related Issues – When dividing community property in a high-asset divorce, it is important not to do so in a vacuum. Alimony, tax, and other related issues can all factor into the division of a high-asset couple’s community estate.

Speak with a High-Asset Divorce Law Firm in Tacoma, WA

If you have questions about the divorce process in Washington, we encourage you to get in touch. To consult with a high-asset divorce law firm in our Tacoma, WA, law offices in confidence, please call us directly or request an initial consultation online today.