Property, Debt & Support A-Z
If there is such a thing as an ideal divorce, it is one where the parties agree between themselves about how their assets and liabilities are divided and whether or not one party will pay spousal support to the other. If they cannot agree, the family law court will make the appropriate orders according to established Nevada law.
Nevada is a community property state which means that each party is considered by the family law court to have a half ownership in all assets, including income and pension plans, which were accumulated by the parties during the course of their marriage. When the parties are divorced, a value is placed on each piece of property so that an equal distribution can be made. Debts that were acquired during the course of the marriage are also equally distributed.
Problems arise when spouses claim certain property is their separate property or want to disavow certain debts. Nevada laws provide guidance to the court in determining whether property is community or separate property and in how to allocate debt. Also, it is common for one party to need financial support from the other one, at least temporarily. Nevada statutes and a Tonopah Formula established by family law attorneys provide guidelines for divorce courts to follow when making a determination of alimony.
Asset Division
Community property: The court presumes that all property and income accumulated during the course of the marriage is community property and belongs equally to both parties. If they divorce, the community property must be divided equally between them. This includes:
- All income earned by the parties during the course of their marriage
- All work-related pension and retirement plans the spouses were part of during the course of the marriage
- Any retirement savings accounts such as IRAs or 401(k)s
Special rules apply to the division of retirement benefits under an employee retirement benefits plan. A Qualified Domestic Relations Order (QDRO) is required. There are complicated rules that apply and the order must lay out specific elements in order to be valid. A particularly important consideration is how the benefits will be handled if the owner of the plan dies. An experienced Nevada divorce attorney will know how to prepare this complex order.
There are some “compelling circumstances” the court may consider in making an unequal distribution such as the misconduct of one party concerning the handling of the assets. Trying to hide assets from the court or wasting assets will not be looked upon favorably by the court and will likely result in the court making an unequal division of the assets.
Wasting assets includes gambling losses or giving gifts that were not authorized by both parties. Although acting irresponsibly with the assets may result in an unequal division of community property, claiming that one spouse is responsible for the failure of the marriage will not affect the division of the assets.Nevada is a no-fault state and it does not matter why the marriage failed. The property is still divided equally.
Who gets to stay in the community property home: If there are children, the spouse who has physical custody of the children will generally be the spouse who gets to stay in the home. If there are no children, the parties need to come to an agreement between them as to who gets to remain. Both parties have a right to stay in the home until the court sorts it out and determines who gets to stay and who has to move.
Separate property is property that a party owned prior to the marriage and kept separate throughout the course of the marriage. Other assets that are considered separate property include:
- Gifts received by one spouse during the course of the marriage remain that spouses separate property
- An inheritance that was bequeathed to just one of the spouses remains that person’s separate property
- Personal injury award to one spouse
A court may order that separate property be used to pay a community debt or that it be used for child or spousal support. Commingling of separate and community property: As a general rule, if separate property has been commingled with community property, it becomes community property. If one spouse claims a separate property interest in commingled property, that spouse must provide proof that traces the ownership to separate property. If the proof is sufficient, the court may order the party to be reimbursed for the party’s separate property interest.
Property disputes: When the parties cannot agree on which property is separate and which is community, the court will look at the factors surrounding the acquisition of the property such as:
- Whether the property was acquired prior to the marriage
- Whose name is listed as the owner of the property
- Why was the property acquired and what were the circumstances surrounding the acquisition
- How was the property treated during the course of the marriage
Omitted assets: Sometimes, years after a final divorce decree is entered, assets are discovered that should have been categorized as community property. Through oversight or some nefarious reasons, the asset was not known about during the divorce proceeding. Nevada law allows for the reopening of the case to adjudicate the division of the asset. If any fraud was involved in hiding the asset, that will be brought to the attention of the court.
Division of Debts
The court will follow the same procedure in dividing the community and private debts as used in dividing the community and private property. A problem is encountered when the court order divides the debt, but the parties do not restructure the debt. As long as both spouses keep their names on the accounts, creditors can continue collection efforts against both parties and are not bound by the court order.
The party being relieved from the debt should write to the creditors informing them of the court order and declare that the party will no longer will be responsible for any debt incurred by the other one. Additionally, at the close of the divorce, it is important that debt be restructured so that all joint charge accounts are closed and that no joint debt remains.
Spousal Support and Alimony
Spousal support is an amount of money paid to one spouse by the other during the divorce process before the final divorce degree. When the divorce is final and one spouse still needs financial assistance, alimony is the correct term under Nevada law.
The purpose of alimony is to enable both spouses to live, as much as possible, according to the lifestyle they enjoyed prior to the divorce. Alimony payments end when either spouse dies unless there is a specific order requiring payments from the deceased person’s estate. The court may award general alimony or rehabilitative alimony.
General alimony: This is awarded on either a permanent or temporary basis. The court uses a formula established in 1997 by the Family Law Section of the Nevada Bar Association at a meeting in Tonopah, thus referred to as the “Tonopah Formula.” The formula sets out factors for the court to consider in establishing whether the award is temporary or permanent and how much the award of alimony should be. A few of the issues a court looks at include:
- The current financial condition of each party, including the value of the property they each have after the community property is distributed
- How long the couple has been married
- The age of each spouse
- The capacity of each spouse to earn income, including whether one party needs further education or retraining in order to be employed
- The health of each party
- The standard of living they each enjoyed during the course of the marriage
- Whether or not one spouse decided to forgo a career to be a homemaker
If general alimony is ordered on a permanent basis, the person receiving it will receive if for his or her life. If temporary, it will end contingent upon the happening of an event or at a date certain. Either party can move the court for a modification of the order for alimony whenever there is a change in circumstances.
Rehabilitative alimony: If one spouse needs support and assistance with education or training expenses in order to become self-supporting, rehabilitative alimony will be ordered. This can be structured in whatever way meets the needs of both parties.
Delinquent alimony payments: If the spouse obligated to pay alimony fails to pay, and back payments accrue, the receiving spouse may get a court order for wage garnishment or to have a lien placed on any real estate owned by the obligated party. Back alimony payments may not be discharged in bankruptcy.
Lump sum versus periodic payments: The court can order the alimony payments to be made in a lump sum. It is more common to order them paid periodically. The court may even dip into separate property for alimony.
Tax implications of alimony: The party who receives alimony must claim it as income on his or her tax return. The amount paid is tax deductible for the paying party.
Prenuptial Agreements
A prenuptial or premarital agreement is a contract entered into by the parties prior to their marriage establishing how property will be distributed and alimony decided if the parties ever divorce. It must be signed and dated by both parties. Courts will generally enforce such an agreement unless there are extenuating circumstances, such as fraud or if enforcing it would be unconscionable.
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