Estate, Gift and Income Tax Aspects of Virginia\u27s Transplanted Community Property - A Primer

Almost a quarter of a century has now passed since the Virginia Supreme Court officially recognized the existence of transplanted community property in this state in the landmark case of Commonwealth v. Terjen, 197 Va. 596, 90 S.E. 2d 801 (1956). In this case, involving a California couple who sold their community-property owned residence in California and brought the proceeds along with them when moved to Virginia, the court held: A change of domicile from a state where the community property law prevails to a common-law state does not affect the community property character of property previously acquired. Thus community property only does exist in Virginia, it is believed to exist on a reasonably extensive basis in some areas of the state and to a limited extent in every area of the state. The recognition of the number and variety of problems that this transplanted community property is creating for Virginia attorneys, lenders, fiduciaries, title companies and others promoted the introduction of HB 278, The Uniform Disposition of Community Property Rights at Death Act, into the 1980 Session of the General Assembly. This Act would provide some sorely needed rules, guidelines and presumptions for those who are dealing with the disposition of transplanted community property in Virginia upon the death of the parties. Although this bill was carried over to the 1981 session for further study, it is anticipated that it will become law at that session because it is of positive benefit to the consumer as well as the interest groups previously named and does not impact negatively upon any interest group. Although the passage of this Act will go a long way toward providing solutions for the many property problems associated with the passage of transplanted community property upon the death of the parties, it will not affect the federal tax consequences associated with the passage of this property. It is these tax consequences that this short article is concerned with