Community Property & Separate Property
Divorcing couples will need to divide assets, debts, and personal property. In Nevada courts look to divide these items equally if there are considered community property. The next logical question is “what is community property”?
Community property is a label defining anything acquired after the date of the marriage. A home purchased after the marriage, a vehicle leased, and bank accounts opened are examples of community property.
- Homes and real estate.
- Vehicles and recreational vehicles.
- Businesses started after the marriage.
- Saving accounts.
- Pensions, 401(k), or an IRA.
- Credit card debts.
You might think having your name on the car title, or on the bank account, or on the credit cards is important. It’s not. Community property is a legal doctrine that doesn’t require actual title or a name on the property to be considered community property. If the property was acquired after the marriage the court will presume it is community property even if only one spouse’s name is on it. A vehicle purchased after the date of marriage with one spouse’s name on the loan and title is still considered community property.
Wage or income earned after marriage is community property. This concept might be one of the hardest for divorcing couples to understand. Wages, or income earned and deposited in a bank account, savings account, or IRA’s are divided equally in a divorce.
Debt works the same way as an asset. Any debts incurred during the marriage are community debts and need to be divided evenly. Credit cards, car loans, home loan, etc. The confusing part of debts is the debt secured against property. Homes and vehicles are the best example. Let’s say you purchased a car after the marriage. You drive it, and there is a loan on the car. The car is a community asset which needs to be divided equally. The loan is a community debt which needs to be divided evenly. Instead dividing the car and the loan evenly the court will look to pair the debt with whomever keeps the asset. Credit cards are unsecured debts and don’t typically pair with an asset.
Student loans are an interesting issue. The Nevada courts look at student loan debts as separate debts secured by the education the person received. Even if the debts were earned after the marriage the public policy is the spouse who earned the education has an asset and should keep the debt associated with the education.
Separate property is property owned before the marriage, or property acquired after the marriage that falls within special exceptions. Separate property remains yours after a divorce and is not divided equally. 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.
Some property acquired after the marriage can be considered separate property. We call these exceptions to community property. Inheritance and gifts are the most common exceptions. Property, money, or heirlooms gifted to you by a family member would be separate property. A home or vehicle inherited would be separate property even if you are married.
Commingling is a legal term used to describe when separate property has been mixed with community property, or has become community property. If you had a savings account before marriage it would be considered separate property. What if you added your spouse’s name to the bank account. You may now have “commingled” the ownership of the bank account and turned it into community property.
What if you started adding community income into the back account. This mixes, or commingles the money. Adding community property money to separate property money commingles it. The end result might be the whole bank account might be considered community property.
Wages is a major culprit in commingling of funds. It is common for a spouse to take wages earned after the marriage and deposit then into a pre-existing IRA or 401K. The IRA was established before marriage and is considered separated property. But, wages are community property. Adding of the community property wages mixes the separate property. If the court cannot distinguish community property dollars from separate property dollars then it will consider the entire account community property.
Commingling boils down to the separate property being mixed with community to the point where it is no longer easy to tell what is community and what is separate. If the court cannot determine whether the property is separate, then it will presume it is community and split it equally.
The primary way to define separate property from community property is to trace separate property.