What is Community Property and How it Affects Divorce Cases

If you are going through a divorce or planning to file one, the term ‘community property’ will come up during your case. Understanding what community property is and how it can impact your divorce outcome is crucial. In this blog post, we will take a deep dive into community property and how it can affect your divorce case.

What is Community Property?

Community property refers to all assets that spouses acquire during marriage. In simple terms, any property that was bought or earned while the couple was married is considered community property. This includes income, real estate, pensions, stocks, businesses, cars, and anything acquired using marital funds. When a couple divorces, community property is equally divided between both parties. However, there are a few exemptions. Property owned before the marriage, inheritances, and gifts given to one spouse are considered separate property and are not divided during divorce proceedings.

Is Nevada a Community Property State?

Nevada is one of the nine community property states in the US. In Nevada, each spouse owns half of the community property, irrespective of who earned the money or whose name is on the title. For instance, if one spouse owns a business and the other spouse stayed at home, the stay-at-home spouse has 50% ownership of the business. Therefore, a divorce case in Nevada can lead to more complicated property division scenarios.

What is Considered Community Property?

It is important to note that assets are not the only things that can be community property. Debt accumulated during the marriage is also considered community property. Therefore, both parties are equally responsible for paying off any debts that were incurred during the marriage, irrespective of whose name is on the account. This can apply to home mortgages, car loans, credit card debts, or any other kind of debt. Divorcing couples should be prepared to deal with the division of both assets and debts.

How Does Community Property Affect Alimony?

Community property laws can have a significant impact on alimony or spousal support cases. When community property is divided, a lower-earning spouse may be entitled to alimony. If one spouse has earned significantly more than the other during the marriage, the courts may order them to pay spousal support as part of their divorce settlement. The length of the marriage, the earning capacity of each party, and the standard of living during the marriage are some of the factors considered when determining spousal support.

Community Property vs. Separate Property in Nevada

The question of property rights, particularly the distinction between community and separate property, can be a daunting one for couples in a marriage or registered domestic partnership in the state of Nevada. The consequences of your choices regarding community or separate property can have a significant impact on your financial well-being. So, understanding the differences between an individual’s separate property and community property can be important.

Community Property

As stated above, in Nevada, any assets or income earned during the marriage is considered community property, with a 50-50 split upon dissolution. Some examples of community property include a jointly owned home, joint bank accounts, and joint investments. This differs from separate property.

Separate Property

Separate property is any property owned prior to the marriage. This includes anything gained during marriage through inheritance or personal gifts given solely to one spouse. All income or assets owned before the marriage are considered that spouse’s separate property, and in the event of divorce, they are not subject to equitable distribution. The same is true for any new property and assets acquired solely by one spouse during the course of the marriage.

Commingling

Commingling is a critical concept to keep in mind when it comes to community and separate property. If the separate property is combined with the community property, it can become mixed or commingled property. For example, if one spouse brings in money from an inheritance account and places it in the couple’s joint account, that money can become community property. In other words, when separate and community properties combine, it becomes more difficult to determine who owns what, and this is where property disputes become tricky.

Community Property vs. Common Law

In a common law state, any property or debt acquired before or after marriage belongs solely to the person who purchased it. However, in a community property state like Nevada, any assets and debts acquired during the marriage belong equally to both parties. Assets and debts that either spouse brought into the marriage, as well as inheritances and gifts received during the marriage, remain separate property.

Is it Possible to Avoid Community Property Laws in Nevada?

While Nevada is a community property state, there are some exceptions to the law. For example, assets that either spouse acquires during the marriage that are derived from a personal injury settlement and are not for future lost wages will be considered separate property. Additionally, if a prenuptial or postnuptial agreement is in place that specifies the property division, this agreement can trump community property laws.

It’s also possible to avoid community property laws by choosing legal separation instead of divorce. Legal separation allows you to live apart and make arrangements for child custody, spousal support, and property division without legally dissolving the marriage.

Community Property and Estate Planning

If you and your spouse physically separate before filing for divorce, it’s essential to seek legal advice to protect your separate property and avoid interference with community property laws. If one spouse passes away, that spouse’s half of the community property estate passes to the surviving spouse, unless a will dictates otherwise. It is crucial to have a will in place to specify beneficiaries and protect your assets.

If a divorce or legal separation occurs, community property assets will be divided equally between the parties unless agreement states otherwise. In addition to divorce and death, changing domicile to another state can also affect community property laws. It’s important to update your estate plan and consult with an attorney to ensure that your assets and liabilities are protected.

Prenuptial and Postnuptial Agreements

The best way to determine the division of assets in a marriage is to have a proper legal agreement in place. A prenuptial agreement must be in writing and explicitly outline the rights and obligations of each spouse concerning separate and community property at the time of marriage. The terms of a postnuptial agreement similarly restrict how property is distributed upon divorce, but it is usually created during the marriage. Both of these documents can help minimize disagreements in the future and protect the spouses’ assets.

Contact the Smith Legal Group to Learn More About Community Property Laws in Nevada

Community property laws in Nevada can be complicated, and it’s important to understand them to protect your assets, whether you are getting married, divorcing, or planning your estate. At Smith Legal Group, we are committed to helping our clients understand their rights and obligations under Nevada law. Contact our office at 702-410-5001 to speak with an experienced attorney and ensure that your assets are protected for the future.