Nevada: A Community Property State
The state of Nevada uses the theory of Community Property to identify which assets are to be equally divided between spouses in the event of a contested divorce. The idea behind Community Property is that once married, all of the “property” the couple acquires throughout the marriage belongs to the marital estate, regardless of purchaser or other variables. “Community Property” is also the term used to signify individual assets jointly owned by a married couple including debt, homes, cars and other physical property, income, pets, and possessions.
Separate Property vs. Community Property
When assessing what property or income is to be divided, the court will first determine any Separate Property. Separate Property is anything earned or owned by one spouse prior to the marriage. These assets are typically granted to their original owner without being divided, however, can still be surrendered to the other spouse later in the form of child support or alimony.
Conversely, any income, property, or debt earned by either spouse during the marriage is considered “Community Property” and therefore split equally. However, there are some exceptions to when a court will allow Community Property to be split disproportionately:
- If both parties agree to a different division of their assets and present it in a written agreement
- If the property was a gift, inheritance, or personal-injury award
- If a spouse can provide compelling economic or just reasoning for an unequal split (This does not include moral reasoning, such as infidelity, etc.)
- If your role in the marriage left you less financially stable than your spouse. (Separately from alimony)
Hiding Assets/Marital Waste
Another scenario where property can be awarded disproportionately is when foul play is involved, specifically via hiding assets or in the case of marital waste. A judge can rule that the guilty party be penalized for malicious activity by forfeiting a portion of their equitable share to make up for the intentional loss to the other party.
If the idea of Community Property seems to pose a risk your personal assets, it might be worthwhile to consider a Prenuptial Agreement. By drafting a prenuptial agreement, the division of your current and future assets can be arranged so that there is no need for a judge to award property division.
Another scenario where the lines can blur between Community and Separate Property is in the case of inheritance. Being that an inherited asset is usually given to one person, it is normally not a part of the marital estate. That being said separate v. community property can quickly change if the inherited asset is commingled with marital assets.
For example, if you receive a large sum of money as an inheritance, to you only and not your spouse, but you place that money in a joint bank account with your spouse, then immediately you are commingling that inherited asset and now you are changing the definition of the asset from a separate property to community property.
Also, for example, say you inherit a home and it is only in your name. If your spouse puts significant amount of money into the house or makes significant amounts of repairs to the house, thus increasing the value of the home significantly, then now that home changes status from a separate property to a community property, to some extent.
If commingling does occur, and the inherited asset is now deemed to be a community property, it will be a very difficult battle and a high burden of proof for the spouse receiving the inheritance to prove to the court that the commingling did not have the intention of changing the designation of that property from separate to community.
One of the most often overlooked assets during a divorce is retirement benefits. Because retirement is usually years away when a couple is facing a divorce, one’s retirement benefits may not be top of mind when dividing assets. Though commonly forgotten, a Qualified Domestic Relations Order (QDRO) can be a crucial element to ensuring financial security after divorce. Because retirement benefits are usually considered Community Property, the lower-earning spouse is entitled to a portion of the benefits after the marriage has ended. To do so however, a QDRO must be submitted to and accepted by the retirement plan.
It’s important to be knowledgeable about what division of property you are entitled to in a divorce, as well as to do your due diligence in making sure your rights are not taken advantage of. Prior to filing for, or finalizing a divorce, it’s important to have accurate and up to date records, photos, and documentation of all major assets, property, and bank accounts should they need to be used as evidence in court.