How to Divide Community Property & Debt

When spouses file a divorce the property and debts they acquired during the marriage must be divided.  Spouse can agree to how everything should be divided or they can take their arguments to the court.   The arguments can be big, like over a house.  Or the arguments can be small like  over a washing machine or a couch.  One our biggest cases was an argument over an inexpensive purple couch.

In a community property state, which Nevada is, all property and debts acquired during the marriage is presumed to be community property. This includes income they each earned during the marriage.   The courts will divide community property equally unless one spouse can show a “compelling” reason for an unequal division.  Separate property is property earned before the marriage or inherited during the marriage.  Separate property is belongs to that spouse and is not divided.

Separate Property is Not Divided

Separate property is the property owned by each spouse prior to  the marriage. It may also include property attained during the marriage through gifts or an inheritance. Separate property is not divided in a divorce. Each spouse keeps all debts or assets considered separate property.

Separate property is defined in NRS 123.130.  ”All property of a spouse owned by him or her before marriage, and that was acquired by him or her afterwards by gift, bequest, devise, descent or by an award for personal injury damages, with the rents, issues and profits thereof, is his or her separate property”.

Separate Property Examples

  • Property acquired prior to marriage
  • Property inherited during the marriage
  • Gifts received during the marriage from a third person
  • Car accident & personal injury awards
  • Student loans
  • Debts incurred before the marriage

Community Property is Divided Equally

Community property is property acquired during the marriage by either spouse. When couples divorce, the community property is divided. It is possible to agree on who gets what. If an agreement cannot be reached a Las Vegas Family Law Judge will divide the property property equally.   The judge can divide the property if a spouse can show a compelling reason to divide the property unequally.   The main compelling reasons for dividing unequally is marital waste.

Community Property Examples

  • Real estate acquired during the marriage
  • Vehicles acquired during the marriage
  • Money deposited in checking and savings accounts during the marriage
  • Money deposited in IRA’s, 401K’s, or a pension during the marriage
  • Business started during the marriage
  • Debts acquired during the marriage

What About Property in Your Spouse’s Name?

Community property is not determined by the name on the property. Homes, vehicles, 401(k) plans, or money in a bank account is community property even if your spouse’s name is the only name on the property or on the account.  For example, your spouses pension earned during the marriage.  This is considered community property even though your name is no where on the pension.  Another good example is bank accounts.  Just because a bank account has your spouse’s name on it does not make it separate property.   The court will look at when the money in the account was earned and deposited.

Nevada law defines community property as ”All property acquired during the marriage by either spouse or both spouses, is community property.”  This statute applies to all property, regardless of the name listed on the title or the bank account.  If the money in the account was earned during marriage, it is community property and will be equally divided in a divorce.

Even if one spouse earned all the money in the bank account from his or her job, the funds are still community property and would be equally divided.  Income earned by the labor of one spouse is considered to be labor on behalf of the community.  The court calls a husband and wife a community.   The courts in Nevada have decided that the skills and labor of each spouse is a community asset.  This means the income received from the skills and labor during the marriage is community property and divided evenly in a divorce.

This might not seem fair, yet this is the law in Nevada.  The courts do not care you were the spouse who earned the money.   If the funds or the property was acquired during the marriage it will be equally divided.

Is a Business Community Property?

Businesses can be a major issues divorce. If the business is started during the marriage then it is community property then each spouse is entitled to an  equal share of the value of the business.  If the business was owned by one spouse prior to the marriage, the profits or growth of the business during the marriage may be considered community property. Evaluating the worth of a business is complicated and should be left to a seasoned divorce lawyer who has years of experience evaluation businesses.  For more information on evaluating a business read our Valuing a Business article.

Commingling Separate Property

Commingling is when you mix separate property with community property.  When you have mixed separate property with community property it may need to be divided equally.  If a spouse has separate property, the spouse must keep it separate. Whether property has been kept separate is a factual issue which must be proven. The court requires clear and convincing evidence the separate property has been contaminated.

A claim for separate property can be made  by tracing the funds used in purchasing the community property.  For example,  you used $100,000 from an inheritance to purchase the home.  If you can trace the $100,000 the court will return you the $100,000 before dividing the rest of the home.

A common situation is when a spouse owned the house before the marriage and then used income during the marriage to continue making payments on the home.  The home was purchased before the marriage. The deed and mortgage is only in the name of the spouse who bought the home.  But for ten years community wages were used to pay the mortgage. This is called a Malmquist issue. The home is part separate property and part community property. The courts will use a Malmquist Formula to figure out home much is both.

Community Debts

Debt can be classified as community or separate as well. Debts will need to be divided the same way property or assets are divided. Community debts are divided equally. Separate debts are not divided. Separate debts can give you legal protection from your spouse’s creditors. Nevada law says that “Neither the separate property of a spouse nor the spouse’s share of the community property is liable for the separate debts of the other spouse”.

Community Debt Examples

  • The mortgage on a home
  • Loans or leases for vehicles
  • Credit cards or unsecured debts
  • Medical bills

Do you need assistance dividing the community property.  Do you think you commingled separate property?  Contact RIGHT Divorce Lawyers at (702) 914-0400 to schedule a consult.