What is Community Property?

Posted: 17 September, 2019

Nevada is a community property state. It is one of the nine states in the  which divide the assets and debts equally rather than equitably.   Equally is “half”, hence the urban legend that during a divorce everything is dividing in half.  Can a couple decide to split property differently?  For example can they split the equity in a home equally,  and then each keep 80% of their IRA?  Yes, couples can agree to almost anything when it comes to dividing property.    The “half” is what the courts will order if both spouses cannot agree.

We know the property is being divided in half, but is this all the property?  Not necessarily.   Only the community property is divided in half.  Separate property goes with the spouse who’s separate property it is.    The next question then is what is community property and what is separate property?

What is community property?

Community property is anything owned jointly after the marriage date.   “Owned” is a little misleading.  It doesn’t always need to be in both spouse’s names.   It just needs to be acquired after the marriage date for a court to presume it is community property.   A car you buy after the marriage (even if it’s in your name only) is considered community property.  This is true for everything from houses to investments to patio furniture.  If you acquired it after the marriage it is presumed community property.

Community property is also anything the spouses gift or commingle.  A car owned before marriage is separate property. If a spouse adds the other spouse’s name to the title then it is considered a gift to the community and is now community property.   A home owned free and clear before marriage is separate property.  If a spouse adds the other spouse’s name to the title then it is considered community property.

Nevada considers half of each spouse’s income earned after the marriage as community property.   This comes up when spouses keep separate savings account.   A bank account may have your name on it, but the money in the account came from wages you earned while married.  The money was community property.  Depositing into a bank account with only your name doesn’t make it separate property.   The money in the account is probably community property.

The following are examples of community property in the state of Nevada:

  • Home and real estate bought after the marriage date.
  • Vehicles and recreational vehicles.
  • Businesses started or worked at after the marriage.
  • Saving accounts, no matter who’s name is on the account.
  • Pensions
  • 401(k) account or IRA
  • Debts incurred after the marriage
  • Time share
  • Frequent Flyer Miles

What is separate property?

Separate property is something you had before the marriage.  Separate property remains yours after a divorce.  Separate property is property acquired before the marriage or after through gift or inheritance.  An example might be $10,000 in bank account that you had before the marriage.  Or, a car you had before the marriage.  These are separate property.   A home your parents willed to you , or a time share given to you by your brother are inheritances and are separate property.

What about money you saved?  For example, a  separate bank account started before the marriage is separate property.  The problem happens when you deposit wages  earned during the marriage into the account. Any wages that enter that bank account become community property.  The entire bank account may even be community property.  This is called commingling

Commingling separate property?

Commingling property is the term for separate property turned into community property.   If we go back to our bank account example, your bank account before your marriage is yours. Once you start contributing to it from your wages, it becomes community property. Because 50% of your income belongs to your spouse, your spouse is essentially adding to your bank account. Therefore it belongs to both of you.

Commingling makes keeping assets separate extremely complicated. But it boils down to the originally separate property mixed with community funds to the point where it is no longer easy to tell who contributed what.  This is because, in most marriages, financial records are not detailed enough to reasonably separate the assets and return them to the right people. So Nevada just splits it 50/50.

Most couples are eager to join and share everything when they get married, from bank accounts to property. This can be a terrific idea to protect a surviving spouse if something happens to the other. It can also get messy is credit scores are dramatically different.

Exceptions to community property

There are a few reasonable exceptions to the community property and commingling rules.  Inheritance is the first. Unless you co-mingle it, any inheritance you receive is yours to keep. Whether it is property, cash, or grandma’s china and silver. If it were bequeathed it you, the court would not split it with your spouse.

The second is gifts given specifically to one spouse by a 3rd party. A birthday present from her parents would not be considered community property, even if it was something valuable.

The final exception is property owned before marriage and kept separate. We covered it in some examples, but for clarity’s sake, we will do it once more.  Let’s say you owned a house you were renting out for extra income. As long as you do not pay the mortgage from a joint account and your spouse never contributes to maintenance or renovation, the courts will likely consider that separate property. Even if you use the house for something that “benefits the marriage,” it might be ruled community property.

Are debts community property?

Yes, although there are some exceptions again.  Debt works the same way as property. Any debts incurred during the marriage (even if it is only one spouse) belong to both of you. The State of Nevada divides debts equally in a divorce.  Your student loans are unfortunately still yours to keep. Although if you took out student loans after the marriage took place, they are community property.  Debts incurred before marriage other than students loans are also separate. Even if you were both contributing to paying them down, they are not something considered commingled.