Community Property

Real Property and Divorce: Part 1

Owning Property as Joint Tenants vs Community Property in a Divorce

You are happily married and you and your spouse are buying a new house. Your spouse just received a big inheritance and now you finally have enough for that down payment for your dream home. So you and your spouse go to the title company to sign your escrow paperwork. Exciting day! You get the keys to your new home, and you move in in joyful marital bliss.

But….. Did you pay attention to how the house is titled? I am guessing not.

Does it matter? The answer is yes it matters. There is a significant difference in the law between owning property as joint tenants versus as community property.

In analyzing property issues in a divorce, start with this base premise: All property purchased during the marriage is presumed to be community property. The party who wants to claim an asset is not community property bears the burden to prove it is not community property by clear and convincing evidence.

Jump ahead five years and you and your spouse are divorcing and have to sell the house. You and your spouse are obviously not getting along, and your spouse states that they want their inheritance back out of the proceeds from the sale of the house. That was their money after all, so they should get it back.

Well, it is not that easy.

If the property is titled as community property, they are out of luck. That down payment is presumed to be a gift to the community and the entire house is community property, unless they can prove by clear and convincing evidence otherwise. How do you do that? In this scenario, there would need to be something in writing executed between you and your spouse stating they get their separate property inheritance back should the house ever sell. Did you execute such an agreement during your time of marital bliss in buying your new home? Unlikely.

It 99.9% of these cases, the house is 100% community property.

So, what if the house is title as joint tenants? Well, Nevada law says a party may request to receive reimbursement for any separate property contributions towards property held as joint tenants, either from the down payment or improvements, but it is within the sole discretion of the court. So what does the court look at to make this decision? The main evidence the Court will look at is the intent of the parties at the time of purchasing the property and agreements executed in furtherance of that intent. Did you mean to put it in joint tenancy at the time you purchased it so your spouse could get their separate property down payment back? Is there that separate writing to confirm this agreement? If not, then they are likely still out of luck.

The community property presumption is very strong. There is no Monday morning quarterbacking on real property. Without some separate writing or proof of an agreement as to how to treat this separate property money at the time of the divorce, it is likely deemed a gift to the community, regardless of how it is titled. You cannot use the technicality of the statute to try and get separate property money back, unless you can prove that was truly the intent of the parties.

But, at the end of the day, this statute exists and arguments are made every day to get separate property money out of property held in joint tenancy.

As a practical note, even from my own personal experience, I am noticing that title companies are defaulting title as joint tenancy versus community property. I am not sure why that is. Most clients in my office have no idea how their house is titled until I look it up. This matters when looking at intent at the time of purchase.

As an example, when my husband and I went to buy our home a few years ago, and we received the title documents at the title company on the day of our closing, there it was – joint tenancy. We were never asked how we wanted to title the property, which I found concerning. I made them change it to community property. The point being, if the documents defaulted to joint tenancy, and you did not intend it to be that way, you do not get to use the benefit of joint tenancy law in regards to getting your separate property back if that was not your intent at the time of purchase. If it was your intent at the time of purchase, then you have to prove it, which means contacting a family law attorney to prepare the agreement to confirm your separate property ownership in that property.

At the end of the day, what matters ultimately is the source of funds used to pay the down payment and the mortgage, how the property is titled, and ultimately what evidence can be shown as to the intent of the parties at the time of the purchase.

Also, please remember that, title companies, real estate agents, and lenders cannot give you legal advice on how to title your property. If you are buying property, contact an attorney and ask questions.