For the most part, California law is clear regarding community property rights upon the death of a spouse:
“Upon the death of a person who is married or in a registered domestic partnership, one-half of the community property belongs to the surviving spouse and the other one-half belongs to the decedent.” Prob. C. § 100(a).
But what happens if it cannot be determined who the “surviving” spouse is? In other words, what happens if both spouses die at the same time — or when the order of their respective deaths cannot be determined — leaving behind community property?
And moreover, is there a conflict between California’s answer to the question of what happens to community property when both spouses die simultaneously, and the applicable federal law? To explore the implications of these questions, it is helpful to apply them to a hypothetical scenario.
Hypothetical Scenario: What Happens to Community Property When Both Spouses Die Simultaneously?
Harry and Wanda were married for 50 years before they were both found deceased, with no indication of which spouse predeceased the other. They died intestate (i.e., they died without an estate plan) and without issue (i.e., they died without living lineal descendants).
At the time of Harry’s death, he held an extremely valuable non-IRA community property retirement account (i.e., a 401(k) or 403(b) account), which was funded exclusively with income earned by Harry during the course of this marriage, and upon which Wanda was the sole designated pay-on-death beneficiary.
At present, Harry’s heirs and Wanda’s heirs have taken competing positions regarding the account, with Harry’s heirs claiming that it belongs solely to Harry’s estate, and Wanda’s heirs claiming that it is community property that should be divided equally between the two decedents’ estates.
Complicating the matter even further is the fact that the account is governed by the federal Employee Retirement Income Security Act of 1974 (“ERISA”), which introduces the possibility that California community property laws may not be the determining factor. A neutral professional fiduciary is appointed as the administrator of both Harry and Wanda’s estates, and is tasked with resolving the issue.
Fairness When Dividing Community Property After the Simultaneous Death of Spouses
Fairness would dictate that Harry and Wanda’s estates should share equally in the community property account they spent their entire adult lives accumulating. But the question of what happens to community property when both spouses die simultaneously remains: With no indication of which spouse survived the other, with competing California statutes governing intestate inheritance in the context of simultaneous death, and with the issue of whether federal or California law applies, is the result dictated by law the same result dictated by equity?
California Community Property Law: A Good Start
The administrator in our above hypothetical begins with the correct premise: California community property law would, at least in principle, provide for all interest in the account to be divided equally between Harry’s estate and Wanda’s estate as set forth above. Prob. C. § 100(a). Unfortunately, the administrator then takes an unnecessary detour onto inapplicable roads before landing at the correct destination.
California Probate Code Section 6402.5(b): Too Hot
The administrator quickly turns to California Probate Code 6402.5(b), an intestacy statute stating that if a decedent’s predeceased spouse predeceased them by less than five years, then the predeceased spouse’s next of kin are entitled to one-half of the community property.
Using this authority, the administrator determines that Wanda’s estate is entitled to one-half interest in the account. While this result sounds equitable, even Wanda’s estate must acknowledge the obvious: Wanda cannot, in good faith, be deemed to be Harry’s surviving spouse. So, how could Probate Code 6402.5(b) be deemed to apply?
Probate Code Section 220: Too Cold
The administrator then considers California Probate Code 220 — the California simultaneous death clause — which sets forth:
“Except as otherwise provided in this chapter, if the title to property or the devolution of property depends upon priority of death and it cannot be established by clear and convincing evidence that one of the persons survived the other, the property of each person shall be administered or distributed, or otherwise dealt with, as if that person had survived the other.” (emphasis added).
As such, only in the absence of more directly applicable statutory authority, and only if title to or transfer of property depends upon the priority of death, and only if the order of death cannot be determined by clear and convincing evidence, then each party whose property is at issue will be treated as if that party survived the other.
This would apply, for example, where it must be shown that an estate beneficiary survived a testator, in order for a gift in the testator’s will to pass to the beneficiary, rather than to someone else. Estate of Lensch (2009) 177 Cal.App.4th 667.
However, were California Probate Code 220 to apply, then it could be argued that Harry’s account (so deemed because it was in his name) would be distributed as if he had survived Wanda, defeating the clear community property interest of Wanda’s estate in the account, and resulting in undeniable inequity.
On the other hand, Wanda’s estate would deem the “property” at issue to be Wanda’s community interest in the account, and therefore, would argue that she should be deemed to have survived Harry and that the entire account should pass to her estate. That this statute could be interpreted in such starkly different ways underscores its inapplicability to the account at issue.
Fortunately, the California simultaneous death clause does not apply, both because an inability to establish that one spouse survived the other does not preclude inheritance by either spouse of their community property interest in any given asset, and because a different Probate Code section more specifically dictates the result when spouses die simultaneous deaths leaving behind community property, and it cannot be established that one spouse survived the other.
Probate Code Section 103: Just Right
Fortunately, Probate Code section 103 directly answers the question of what happens when both spouses die at the same time leaving behind community property.
Specifically, this statute establishes that when the order of spouses’ respective deaths cannot be determined, one-half of the community property shall be distributed as if the first spouse had survived the second, and the other half shall be distributed as if the second spouse had survived the first, stating:
- One-half of the community property and one-half of the quasi-community property shall be administered or distributed, or otherwise dealt with, as if one spouse had survived and as if that one-half belonged to that spouse.
- The other one-half of the community property and the other one-half of the quasi-community property shall be administered or distributed, or otherwise dealt with, as if the other spouse had survived and as if that one-half belonged to that spouse.
Section 103, therefore, confirms that title to or the devolution of community property does not depend upon establishing the priority of death, and so, by its own terms, section 220 does not apply.
Just in case there was any ambiguity as to the precedence section 103 takes over 220, Section 221(a) (set forth in the same chapter of Probate Code Division 2 as section 220) definitively clarifies same:
“This chapter does not apply in any case where Section 103, 6211, or 6403 applies.”
Does ERISA Preempt State Laws?
As set forth above, the retirement account at issue in our hypothetical is governed by ERISA, which provides that where a pension plan participant dies before retirement, their “surviving spouse” shall be paid a benefit, but the right to a survivor benefit ends at the spouse’s death. 29 U.S.C. § 1055(e)(l).
A state law is preempted if its application “conflicts with the provisions of ERISA or operates to frustrate its objects,” and ERISA preempts state laws “insofar as they … relate to any employee benefit plan.” 29 U.S.C. § 1144(a); Boggs v. Boggs (1997) 520 U.S. 833, 841.
Thus, the administrator is faced with the question: Does ERISA preempt California’s state laws in the determination of what happens to community property when both spouses die at the same time?
First, the administrator finds that ERISA would preempt California Probate Code 6402.5, as both were in direct conflict with each other. Specifically, the latter statute provides that when a surviving spouse post-deceases a deceased spouse by less than five years, the surviving spouse’s heirs receive the surviving spouse’s portion of the decedent’s estate.
By contrast, under ERISA, the right to survivor benefits ends at the deceased spouse’s death. Given this conflict, ERISA would preempt California law. However, as set forth above, Probate Code 6402.5(b) does not apply to our hypothetical, as there can be no determination that either Harry or Wanda predeceased the other.
ERISA, conversely, would not preempt application of California Probate Code 220 if the latter section were interpreted to result in the entire account passing to Harry’s estate, as there is no conflict between their respective results.
On the other hand, ERISA would absolutely preempt California Probate Code 220 if the latter were deemed to result in the account passing solely to Wanda’s estate. However, as California Probate Code 220 does not dictate this matter, as discussed above, this statute’s harmony with ERISA, or lack thereof, is immaterial.
As previously mentioned, Probate Code section 103 directly controls this situation, establishing that when the order of spouses’ respective deaths cannot be determined, one-half of the community property shall be distributed as if the first spouse had survived the second, and the other half shall be distributed as if the second spouse had survived the first.
This statute directly controls the issue of what happens to community property when both spouses die at the same time, an issue on which ERISA is completely silent. As Section 103 does not conflict with ERISA, preemption is not an issue, and both Harry and Wanda’s estates can each receive a one-half interest in the account.
Key Takeaway: Avoid the Distraction of Inapplicable Authority When it Comes to Spouses’ Simultaneous Deaths
Harry and Wanda’s story warns us not to be complacent with inapplicable law. In the case of what happens when spouses die simultaneous deaths leaving behind community property, distributing community property as though one spouse predeceased the other may lead to a “fair” result, but it does so by unfairly interpreting the law. See Prob. C. § 6402.5(a). It may also lead to a grossly inequitable result, depending on the arbitrary interpretation of statutes, which clearly do not apply to the matter at hand. See Prob. C. § 220.
Fortunately, the law and equity often align, as it did for the estates of Harry and Wanda. See Prob. C. § 103. And given ERISA’s deafening silence on the issue of spouses’ simultaneous deaths, this clear and equitable result is not stymied by preemption.
While the administrator’s analysis of the matter tangentially circled the issues before addressing them directly, both Harry’s and Wanda’s estates are surely glad that he finally reached the correct result.
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