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How are Community Property and Debts Divided in a Divorce?

You are about to get started with a divorce and wonder. How are community property and community debts divided in a Nevada divorce?

COMMUNITY PROPERTY

Nevada is a community property state. This means that, in a marriage, the name under which an asset is held does not determine which spouse holds an interest in it. This means that even if you buy a house in your name only while married, the house belongs to both your spouse and you (unless your spouse signed a waiver during the purchase).

What’s important is whether the married couple purchased the house during the marriageand what source of funds were used to make the purchase.

If you have a prenuptial or postnuptial agreement that addresses community property what we say here does not pertain to you. Your pre or postnuptial agreement would prevail.

This article assumes that you live in Nevada and do not have a prenuptial or postnuptial agreement.

 

HOW EQUITY IN A HOME COULD BE DIVIDED

Let’s say you purchased your home before the marriage and once married, you make the mortgage payments from a joint account. If you live in Nevada, this would give your spouse a right to half of any equity increase in the home since the date of the marriage. Before equity distribution, however, your down payment would be returned to you if you sold the house as a part of the property settlement.

Let’s follow John and Mary for a simplified example of the above.

  • Mary purchases a home on her own before her marriage to John.
  • She puts $10,000 down on the home.
  • Once married, the couple opens a joint bank account and makes the mortgage payment with funds from that account.
  • After five years of marriage, they divorce.
  • Since the date of the marriage, the home has increased in equity by $30,000.
  • They sell the home as part of their marital settlement.
  • Mary gets her $10,000 down payment back
  • The remaining $20,000 in equity is divided between them.
  • Any equity from before the date of the marriage belongs to Mary.

 

HOW ANY OTHER PROPERTY MIGHT BE DIVIDED

The same goes with any other property purchased after the marriage, such as a car or fine art, or jewelry.  In community property states, it doesn’t matter in whose name the property (houses, cars, furniture, art work, electronics, etc.)  is held under.

Let’s go back to John and Mary.

  • A year after they married, the couple buys a vintage car.
  • They use funds from their joint account to pay for it, $16,000 in cash.
  • John has the car registered in his name only because it was just easier.
  • When they divorce, John gives Mary $10,000 for her share of the car now worth $20,000.
  • It doesn’t matter that the car is in John’s name only.

In Nevada, the earnings of either party during the marriage are community property. If one of you makes more money than the other and deposits more into a joint savings account,  you’re both entitled to half of those funds, not just what you each deposited into the account.

If you keep ownership of real, or other, property and bank accounts separate and don’t use community funds to augment them or to pay for maintaining them, such as maintaining a house you owned before the marriage,  then said property and accounts will remain your separate property.

 

INHERITED PROPERTY

Inherited property doesn’t fall under Nevada community property, BUT there’s a caveat.

For example, John’s mother passed away two years into his marriage and left him a mortgage-free house worth $200,000.

John never used community assets for upkeep because his mother also left him some money for that purpose. John has never commingled those funds. The house belongs to John only and Mary has no rights to it.

If John quitclaims the house to Mary and himself after he inherits it, Mary now has a right to any equity increase in the house from the time he recorded the quitclaim deed. If the house remains in his name only, but he uses community property funds to maintain the house, Mary now has a claim to the house because John gifted the house to their community property interest by using community funds.

 

COMMINGLING OF FUNDS

We find that commingling of funds, mixing separate property with community property,  such as John paying to fix the house his mother gave him with funds from a joint account he has with Mary, is the usual ways separate property becomes community property. We refer to this as transmutation. There is a presumption that when you donate separate property to community property that it is a gift to the community property.

 

 

COMMUNITY DEBTS

The parties share any debt entered into by either spouse during the marriage.

Let’s say John took out a credit card in his name only while married to Mary and stopped making payments at some point. Mary is responsible for that debt same as if she’d opened the account herself. Creditors will look to her for payback if John does not pay.

If the final decree of divorce states that John is responsible for paying back the debt, the creditor still has the right to go after Mary for payments if John defaults.

Though Family Court has jurisdiction over John and Mary, it has no jurisdiction over a third party such as a credit card company. Usually, credit card companies do not go after an ex-spouse to collect, but it has happened,  and they have a right to collect from Mary.

Same thing with any debt at all, be it a car, a house, furniture, or art work. Say John bought a car during the marriage, in his name only, and he gets the car as a part of the divorce settlement. But, also as a part of their settlement, Mary takes responsibility for the car payments. A year after the divorce, she defaults on the payments: the car company will repossess it from John even though it’s Mary’s debt, not his.

The bottom line is that Nevada is not a title state but a community property state.  For the purposes of a divorce, a community is like a partnership with each party reaping benefits for both partners or incurring debt for both of them.  The two become one.

NRS 125.150 is where you’ll find the Nevada statutes that pertain to division of property in a divorce.

Do you wonder if you’ll have to pay alimony if you divorce? Or spousal support if you separate? This article will explain it.

If you have questions about how to divide your property in your divorce, or if you’re ready to get started with your divorce, read more here

 

 

5 Things You Should Do With Your Finances During a Divorce

finances during a divorce

When you get a divorce in Nevada, a community property state, you generally divide all property and debts down the middle. This means everything you own and everything you owe, either together or even separately, gets divided pretty much down the middle, unless there is a good reason as to why it shouldn’t be, and unless the property in question falls under an exemption.  Below are five things you should do with your finances during a divorce.

1.       Know what property belongs to the community assets and which is exempted
For instance, if you inherited a sum of money, no matter its size, that’s yours alone. 

Other things to consider, regarding your finances during a divorce are as follows:
If you bought the house in which you and your spouse resided before the marriage, and you never co-mingled funds to pay the mortgage, or to pay for its upkeep, the house is yours alone. If you already owned it, but you used your current salary to make mortgage payments, or your spouse helped make the mortgage payments after the marriage or paid for upkeep and updates, then your spouse is entitled of one half of the equity increase that has occurred since the marriage, minus the down payment you made at the time of the purchase.  

We once had a divorce case where Husband had added Wife to a savings account he had with his parents. The judge said that the funds in that account were now a community asset and he ordered that Wife be given one-fourth of the monies in that account even though she had never contributed to it. 

Also,  if you use separate property funds to pay community marital debt, it is presumed to be a gift from your separate assets to the community assets.

If your Uncle John gave you a $50,000 (or any gifted amount), for any reason whatsoever, it’s yours alone, as long as you don’t deposit it into a joint account. Then, it becomes part of the community assets.

2.       Pay down your community debt before you file, or at least before the divorce is granted
It’s always best to pay off as much of your debt as possible before the divorce is granted. The fewer joint debts you have, the easier it will be to negotiate and divide them, not to mention being able to put them out of your mind completely. Because even if your ex-spouse is responsible for a joint credit account as part of the divorce settlement, you’re still liable for that debt if your ex-spouse doesn’t pay.

Third parties (such as creditors) are not bound by the rulings of a family court. Most creditors will honor what it says in the final decree of divorce, but only as long as the payments are being made. So if the judge says that Mary must make payments on the car she’s driving, but John is also on the loan, if Mary doesn’t pay, the credit company is likely to come after John to make the payments. Should this happen, the only recourse for John is to go to Family Court to try and resolve the issue. A family court judge is likely to hold Mary in contempt of court if she doesn’t make the payments ordered in the decree of divorce.  

3.       Credit reports
The best thing to do here is to obtain your credit report, and that of your spouse, from all three credit agencies and scrutinize them for all monies owed by you and your spouse. Unless an account was just opened very recently, all credit accounts are bound to appear on there. If you suspect your spouse might have recently opened new accounts without discussing it with you, get updated credit reports about a month later. You want to be certain that there are no surprises after the divorce.

A man we know vaguely (we didn’t represent him, or we would have told him how to care for his finances during a divorce)   discovered after the divorce that his wife had purchased a 72” television and put on the electronics store’s credit card he had opened with her.  Bottom line here, is that unfortunately, he was just as liable for that debt as she was; it turned out that she paid the debt, but it could just as easily have gone the other way.

To be sure you know all that’s going on with your credit during this time, consider credit monitoring. Some banks offer this service for free if you have a credit card with them, so start there. Having your credit monitored means that you are less likely to find new debts you knew nothing about after the divorce is finalized.

4.       Freeze or close joint credit accounts
To take things one step further with your finances during a divorce, and assure that nothing can be added to your joint accounts, consider simply closing or freezing all joint credit accounts. As you know, you should immediately close all joint bank accounts.  

Freeze your accounts by calling all credit card companies and telling them about the divorce and asking for them to no longer allow new charges on the account. Note that this will mean that you also won’t be able to charge anything on those cards.

Your attorney is likely to file an injunction to prohibit your spouse from taking large sums of money from your accounts and to prohibit him or her to in any way encumber the community estate with debt, but it’s easier to freeze and close as many accounts as possible, as it will take you more time and energy to try and recoup what is spent if your spouse doesn’t abide by the injunction

5.       Be sure to complete all financial tasks as soon as possible after the divorce is granted
Taking care of finances during a divorce doesn’t end when you get your final decree.  There are still often tasks left to perform to protect yourself and your credit standing.  If you are keeping the marital home as part of the divorce settlement, be sure to file the quitclaim deed as soon as possible. What you don’t want is for your spouse to still appear to own the house and use it as collateral for any type of loan. Same with any other property, such as cars and bank accounts.

And if your spouse is the one to keep the house, and is supposed to refinance it in her name only, follow through until you see proof that it’s been done. You are still responsible for that mortgage until it’s paid off.

Lastly, when it comes to finances during a divorce, many people neglect to  review their living trust and will. Your priorities there are sure to have changed based on the divorce, so don’t neglect this very important task.

If you have more questions about this, or you want to get a divorce started, you can find us at http://nevadadivorce.org

How to Choose a Divorce Attorney in Las Vegas

How to choose a divorce attorney in Las Vegas

I understand your dilemma. There are ton of divorce attorneys in Las Vegas; which one should you choose?  Most people only go through a divorce but once or twice in their lives, and have little experience when it comes to dealing with it.

The one thing you want to avoid is hiring the wrong attorney and have to switch as this increases the overall cost of your divorce.

I aim to give you good general advice and not just get you to choose me as your divorce attorney.  These are guidelines you can follow with any attorney you consider retaining for your divorce.

  1. First know what kind of divorce you are getting into.

Does your spouse agree to a divorce? Does he or she agree to sign the divorce documents? The answer to this question is important and it will affect what type of attorney you should look for to represent you in your divorce.

If you already know that your spouse agrees to sign the divorce papers, you’ll need one kind of divorce attorney, and if your spouse refuses to be reasonable and plans to fight you every step of the way, you’ll need another.

  1. What kind of divorce attorney do you need?

Of course, you need a divorce attorney whether your spouse signs or not, but they come in different flavors too. To determine which type of lawyer is best for you, you need to first know the answer to the question posed above; will your spouse contest the divorce or not?

If your spouse is reasonable and you both agree on all the terms of a divorce on your own, you can file a joint petition divorce.  You can bring all your terms to your attorney and he or she will include them in the divorce pleadings.

That said, if you have been married for a number of years and own property together, have children together, and pensions are involved, and even if you think you agree on all the terms, it would be a good idea to go through mediation just to be sure that you are treated fairly. There are guidelines a divorce mediator can follow to ensure that you are both getting what is fair for your particular situation, finances, and length of marriage. 

If your spouse won’t sign the documents, and will contest the divorce once filed, you’ll need a much more aggressive attorney than if your spouse agrees to terms you set together or through divorce mediation.

If your spouse is intent on fighting everything to the end, your best option is to find a divorce attorney who specializes in litigation.

Before you retain a divorce attorney in Las Vegas, be sure that he or she is open to alternatives, to mediation, rather than choosing a divorce lawyer whose typical strategy is divorce court before he or she has even “felt out” the other side.  

Whether children and finances are involved or not, it’s always best to try mediation first before you enter litigation, either through an attorney who offers collaborative divorce as a part of his or her divorce practice, or through a certified and licensed non-attorney divorce mediator.  

  1. Find at least three attorneys

This would be a good strategy to follow:

  1. Ask for referrals from friends and acquaintances who got divorced before you
  2. Read online reviews
  3. Keep looking until you find three attorneys you think you will like
  4. Interview the three attorneys.

Many divorce attorneys in Las Vegas will give an initial consultation at no cost for divorces that are bound to be contested. I do. 

If your case is very simple and uncontested, you can simply talk to the attorney or his staff on the phone. In such a case, you just need information on divorce procedure rather than legal advice.

If your case is to be contested, it’s probably best to meet all three potential attorneys in person. You want to see for yourself how these divorce attorneys look and what demeanor they have. This person might end up representing you in divorce court. You want to be sure that he or she is a proper reflection of you.

Ask the following questions:

  • What is your experience with (contested or uncontested) divorce?
  • Do you specialize in any particular type of divorce (litigated, collaborative, uncontested)?
  • Do you favor collaborative divorces over litigation whenever possible?
  • Do you offer flat fees for uncontested divorce matters?
  • What is your fee if my divorce becomes contested? Typically, a divorce attorney in Las Vegas charges an hourly fee. Usually, a retainer fee is paid and the hourly fee is charged against it. The attorney is bound to deposit any retainer into a trust account and will then take portions of the retainer out as they are earned. 
  • How long have you been practicing divorce law in Las Vegas?
  • How often go you go to family court here?
  • How familiar are you with the judges currently sitting on the bench?
  1. Make your choice.

After interviewing all the lawyers, retain the divorce attorney with whom you feel most comfortable.

Be sure that he or she is a highly experienced divorce attorney in Las Vegas. In other words, he or she is a local attorney, not a lawyer who, say, just moved to Las Vegas from Reno.

Be sure that he or she regards divorce in the same way you do. For instance, if you favor a joint petition divorce, meaning you want to come to an agreement on all the terms of the divorce and you want both you and your spouse to sign the divorce papers before filing, choose an attorney who will do his or her best to promote mediation if you hit a road block, rather than immediately pushing for court.

Of course, if your intent is to go to court to fight for everything you want and you have no intention to compromise, then choose a strong litigator with a good track record for winning tough divorces.

Be sure you know all the fees you will be charged up front and what it could cost down the road.

If you follow this guidance, you should end up with a professional and highly experienced divorce attorney in Las Vegas, one who cares as much as you do about the outcome of your divorce.

5 Tips to Survive Divorce During the Holidays

divorce during the holidays

Divorce clients who come to us in December often seem a bit more distressed than they are the rest of the year.  We get it.  A divorce scores 73 on a 1-100 stress scale with 100 being the most stressful event in a lifetime. Add to this the holidays and expectations to give more, love more, and forgive more. They feel confused and wonder how to find it within themselves to do that in the face of a divorce during the holidays. If children are involved, this time period becomes even more difficult and emotional to navigate.

1.  If you’re in the middle of a divorce during the holidays,  you need a plan.

The first thing you can do is to remember that our emotional state is attached to familiar actions and surroundings. Therefore, the first thing you should do to make the holidays easier and even enjoyable for you and your children is to change those actions and change those surroundings. 

If possible, take yourself out of your usual holiday surroundings.Visit out-of-state family, for instance. If this is not possible…

2.  How about starting a new tradition? Do this on your own or with your children if you have them. It’s probably best for your emotional well-being to not continue with the traditions you followed with your spouse. Having your very own traditions will keep you focused on the positive and new rather than distressing over going through a divorce during the holidays. For the kids, it could be fun and distract them from what’s now different, namely, that, possibly for the first time in their lives, they are only with one parent at a time for this year’s holiday.

Justin had always wanted to take his children ice-skating around the holidays, but his  soon-to-be ex-wife didn’t like it at all, so they never went. He decided to now make it a holiday tradition to spend an afternoon at the ice skating rink with the kids and then take them out for hot chocolate after. It turned out to be a hit with them. It also gave everyone hope that the holidays could still be a happy time for them despite the divorce.

3.   Are you single? Or are your children scheduled to be with your ex during this holiday season? Plan ahead to do something to help others when going through a divorce during the holidays. It’s a well-known fact that helping others lifts our own spirits. Volunteering your time to a shelter, for instance, would take your mind off your own suffering and warm your heart as you help others even less fortunate than you. Or find other single parents whose children will be with their other parent that day and celebrate together, doing something none of you usually does on that day.

Karin reached out to two other friends whose children were going to be with their other parent for the last day of Hanukkah. She arranged ahead of time for them to visit residents of a nursing home who didn’t get visitors or whose families were out of state. They bought several low-cost gifts and wrapped them brightly and delivered them to these residents with good wishes, bringing tears of joy to the eyes of some. This made the women feel very happy inside and thankful for the happiness they still had in their own lives. They followed this up with a special dinner at a restaurant none of them had ever been to before.  They vowed to do it again the next time their children were with their other parent for a holiday.

4.  No matter what, make sure that your children feel loved by both parents during this time. Make sure they don’t feel pulled between you and made to feel guilty for being with one or the other parent on any given special day. If you are still working out the holiday visitation schedule, be sure that the children have ample time with each parent and vary it up, from year to year if the children have to travel some distance between you and your soon-to-be ex-spouse.

If a certain holiday is very important to both you and your spouse, make it so that you both get the children for a portion of it, but be sure and do it in a way that is enjoyable for the children too. If you live far apart, it would most likely be best to agree to an alternate-year holiday visitation schedule.

Robert and Diane, who live 500 miles apart, agreed that their two children should spend all of the holidays with one another at least until their late teens, and made it so that the children spent the Christmas holiday with Diane during odd years and with Robert during even years.

Having to fly or take a bus to get from one parent to another on an actual holiday to meet a visitation schedule would most likely make your child dread that holiday rather than look forward to it.

5.  Lastly, but most importantly, do NOT become a recluse if you are going through a divorce during the holidays. Even if you’d rather  pull a double shift at work, or stick your hand in fire,  force yourself to go out and mingle with good friends or family (stay away from those who constantly bring up negative things about your ex or ask them to stop). Your spirits will lift from your new activities! We are social creatures and even when feeling low, we derive happiness and comfort from being around others.

Happy holidays to all!

 

P.S. If you haven’t retained an attorney yet and want a more affordable solution, visit our divorce website, NevadaDivorce.org

Should you file a legal separation?

legal separation

In Nevada, if you wish to dissolve a marriage, there are two options for you:

  1. File a divorce. This is the cleanest option, the one that permanently dissolves the marriage.
  2. Legal separation. If you object to divorce on moral or other grounds, or rely on your spouse for health insurance, your option is to remain married, but legally separate your assets, as well as address child support and visitation through an action for separate maintenance, as it is formally referred to in Nevada, but commonly known as a legal separation.

If you wish to protect yourself from the financial obligations entered into by your spouse after a separation, and you either object to divorce, or you want to take some time before filing one, or one of you must remain on the other’s health insurance, a legal separation is your best option.

If a divorce is filed later, the terms of your legal separation can be incorporated into the Decree of Divorce, or you can make new terms.

Essentially, a legal separation addresses all issues normally addressed in a divorce. The only thing it doesn’t do is permanently dissolve the marriage. In other words, all of your property is divided and all issues regarding any children you might have with your spouse are addressed, but you are still married. Neither of you can marry anyone else.

Issues commonly addressed in a legal separation:

  • Spousal support
  • Child support.
  • Possession of community property and debt.
  • Division of community property and debt.
  • How future income will be handled.
  • How future property bought by either party after the separation will be handled.
  • How future debt entered into by either party after the separation will be handled.
  • Disclosure and modification provisions.
  • Relationship to divorce decree and reconciliation.
  • How the parties will file taxes and who will be responsible for payment of taxes.
  • Who will be responsible for the attorney fees.
  • How your estate will be managed.

Before filing a divorce, which dissolves the marriage completely, especially when you have minor children, it is often wise to consider filing a legal separation first as a way to test if you really do wish to end the marriage.

Below are some circumstances and conditions under which you should look at legal separation instead of divorce:

  • Are you an older couple where medical insurance and spousal benefits are important?
  • Do you have younger children together and wish to cause them minimal trauma? It might be less difficult for them to hear “mommy and daddy are getting separated” instead of “mommy and daddy are getting divorced.”
  • Are you uncertain about forever dissolving your marriage? A trial separation could give you better insight into whether you wish to permanently dissolve your marriage through a divorce.
  • Are you in a long-term marriage? Have you considered the cost and consequences of unwinding the community property? Is it worth the attorney fees, appraisal costs, and expert fees?

Oftentimes, a separate maintenance has a clause that indicates that in the event the parties divorce after the legal separation has been granted, the obligations, duties, rights and responsibilities contained in the decree of separate maintenance (legal separation) will be incorporated by reference into the decree of divorce. It’s wise to do this since not having this clause in your legal separation could add to the cost of your divorce (if you ultimately decide to take this route) where all the issues would have to be re-entered in the final decree of divorce, instead of the decree of separate maintenance being incorporated into the divorce.

You are free to include any provisions in your legal separation as long as they are in compliance in with the law and not against public policy. For example, in Nevada, parties to a divorce or legal separation cannot agree to lump sum child support because the Supreme Court has ruled against it.

If you and your spouse reconcile after a legal separation filing and after the decree has been granted, the decree of legal separation will be terminated. If you separate again, you will have to file a new legal separation, unless the first decree contained a provision that the first decree of legal separation will continue in full force if you reconcile then separate again.

 

 

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