Jennifer Mahe: Distinction between community and separate property

Nevada is what is commonly referred to as a community property state. What this means is the ownership status of property owned by a married individual is designated as either the individual’s separate property or the couple’s community property. Separate property is generally defined as that property which was acquired by a spouse prior to marriage or was received as a gift or inheritance directly to that spouse during the marriage. Community property is generally defined as all property acquired during marriage that’s not otherwise defined as separate property. Accordingly, in Nevada the date of the marriage usually creates a line of demarcation by which one can determine whether property is considered separate or community property.

The status of property as either separate or community property can be legally relevant in a variety of situations. Nonetheless, there are two situations in which people commonly encounter the relevance of this distinction.

The first situation, and the one most people think of first, is the situation in which the married couple seeks a divorce. Part of all divorce proceedings is identifying the assets owned by the married individuals. The court thereafter must determine if the assets identified are community or separate property assets. If an asset is a community property asset than it’s owned jointly by the individuals and must be divided in some manner between the two individuals as part of the divorce proceedings. However, if an asset is separate property than there’s no need to divide the asset as it’s wholly owned by one of the individuals and it’s going to remain that individual’s property following the conclusion of the divorce.

The other situation in which the distinction between community and separate property is commonly encountered is the estate planning or probate process. The status of property as either community or separate property often impacts who inherits the property of an individual. If a married couple creates an estate plan they are not required to pass their property to the same individuals. Each individual in the married couple can identify to whom they want their assets to pass. In that regard, if they have any separate property, the entirety of those assets can be distributed to the people identified by the owner of the separate property. The other spouse has no control over who inherits the separate property asset. Community property assets may be divided to satisfy the desires of the couple as such desires are identified in the estate planning documents.

Additionally, where an individual does not execute an estate plan prior to their death their assets are distributed pursuant to Nevada’s intestacy statutes. Depending upon the family situation of the deceased, for example whether they have a surviving spouse or whether they have surviving children, the intestacy statutes will dictate a specific distribution. Nonetheless, this distribution is generally affected by whether the assets owned by the deceased are separate or community property. In fact in some intestate scenarios the community property assets are distributed entirely to the surviving spouse and only the separate property, if any exists, it’s distributed to the other heirs, for example surviving children.

Accordingly, the distinction between separate property and community property is important to understand for all married couples, regardless of whether they are contemplating divorce, as the distinction can have legal impacts in other areas of the individuals’ lives.

Jennifer Mahe has practiced law in the Northern Nevada area since 2005 focusing on general civil matters such as real estate, business, litigation and estate planning. She can be reached either via the Mahe Law, Ltd. website, www.mahelaw.com, or at 775-461-0992. If you have a legal topic related to general civil law which you would like to see addressed in this column in the future please send that topic to editor@nevadaappeal.com.