Understanding Nevada's Community Property Laws: Navigating Spousal Debt Liability
- 7 min read
- Nevada is one of 10 community property states.
- Debt created during marriage in Nevada is presumed to be community debt.
- In Nevada, creditors must have signatures from both spouses to collect the debt.
Table of Contents
Have you ever wondered how debts work for husbands and wives in Nevada? Let's explore!
In Nevada, there's a rule called community property law. This means if a husband or wife takes on a debt during their marriage, both of them might have to pay it back. So, if one person borrows money, the other might need to help in paying it off.
However, there are some exceptions. For instance, if the debt is connected to something that only one spouse owns by themselves, then only that person might have to pay the debt. The article also discusses something called the 'doctrine of necessaries.' This is a special rule in Nevada that could make one spouse responsible for certain debts of the other.
Learn about how Nevada decides who owns what in a marriage, who has to pay debts that were there before and during the marriage. Also, learn about how being in a relationship similar to marriage, like a domestic partnership, can change things about your property and debts.
Is Nevada a community property state? And how does that affect my debt?
Nevada is one of 10 community property states. You may have liability for your spouse’s debt even if you knew nothing about it. But Nevada’s community property law for spousal debt is tough on creditors, so do not assume you should pay your spouse’s debt. However, a separate law called the doctrine of necessaries may obligate you to pay your spouse’s debt in Nevada. If you are married and reside in Nevada, you must learn if the creditor has the right to collect your spouse’s debt from you.
This article focuses on spousal debt liability, but there’s much more to Nevada’s community property law. See NRS Chapter 123 – Rights Of Husband And Wife and Summary Of Nevada Community Property Law (PDF) to learn how Nevada law handles divorce, property ownership, and credit applications.
|Community Property States|
Community Property at a Glance
In community property states, the presumption is wealth or debt created during the marriage is part of the community property. Therefore, courts in community property states assume a debt incurred from the date of marriage to the date of divorce is a community debt that is to be divided equally between the spouses.
Many courts in community property states assume the rents, profits, and issues of separate property remain separate. The fruits of community property are community assets. If a spouse claims that a certain property is separate, it is up to that spouse to prove the property was acquired with separate funds or separate credit. For example, the fact that both spouses sign a mortgage does not mean the property cannot be shown to be acquired with separate funds.
By contrast, separate property is property acquired before marriage, and property acquired by a spouse during marriage through gift, inheritance, or an award for personal injury damages.
Spousal Liability For Debt in Community Property States
Let us assume you live in a community property state. A creditor files a lawsuit against your spouse for a breach of contract relating to the default on a credit card balance. In most community property states, the spouse of the defendant has liability under community property laws. The creditor may have the option of file a lawsuit against the defendant’s spouse. If the spouse of the debtor is sued, and the court considers this particular debt as community, then the non-debtor spouse could challenge their liability in court and may be able to avoid a judgment.
Spousal Liability For Debt in Nevada
Nevada is a community property state. Nevada courts presume debts incurred during the marriage as a community obligation. This means in a divorce, community debt is divided equally between the spouses. Spouses can alter this with a pre-nuptial agreement.
When it comes to creditors and debt, a non-borrowing spouse has no liability if the lender relied on the borrowing spouse’s separate personal property to secure the credit. However, both spouses will have liability if if the lender primarily relied on borrowing spouse’s earning capacity to establish the loan (Greear v. Greear, supra, 303 F.2d 893 (9th Cir. 1962)). Known as “intent of the lender” test (Schulman v. Schulman, 92 Nev. 707, 716 n.9, 558 P.2d 525, 531 n.9 (1976); and Dimick v. Dimick, 112 Nev. 402, 915 P.2d 254 (1996)).
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As a practical matter, creditors need the signatures of both spouses on a credit application to pursue collection of credit debt from both in Nevada.
Consult with a Nevada lawyer who has family law experience to learn more about Nevada community property law. If you cannot afford a lawyer, contact Nevada Legal Services or another Nevada pro bono program to find low- and no-cost legal services.
Nevada Community Property Law at a Glance
|Husband or wife liable for debts of other incurred before marriage?||Neither the separate property of a spouse nor the spouse’s share of the community property is liable for the debts of the other spouse contracted before the marriage.|
|Husband or wife liable for debts of other incurred during marriage?||No liability if lender primarily relied on borrowing spouse’s separate personal property to secure the credit. Liability if lender primarily relied on borrowing spouse’s earning capacity to establish the loan. Known as “intent of the lender” test.* As a practical matter, creditors need signatures of both spouses on a credit application to pursue collection of credit debt from both.|
|When do spouses become subject to state community property laws?||When the spouses are married and domicile in the state.|
|Does the state recognize common law marriage?||No, but it recognizes a common law marriage legally established elsewhere.|
|Does the state recognize some from of domestic partnership as an alternative to marriage?||Yes.|
|Does a domestic partnership under state law create community property rights and obligations?||Yes.|
|When does the community property regime terminate (causing subsequently acquired assets or future income to no longer be characterized as community property)?||Change of domicile, death, decree of divorce or decree of legal separation.|
|How is post marital income generated from separate property (e.g., rents, dividends, interest) characterized?||Separate property unless derived from a spouse’s labor or community property funds. If so, an allocation must be made.|
|How does the state characterize appreciation in the value of separate property?||Separate property unless derived from a spouse’s labor or community property funds. If so, allocation or reimbursement issues must be dealt with. A federal tax lien attaches to the right to reimbursement.|
|How does the state characterize property taken by spouses under a deed reflecting that the property is held in joint tenancy?||The property is rebuttably presumed to be a joint tenancy.|
|How does the state characterize property taken by spouses under a deed reflecting that the property is held in tenancy in common?||The property is presumed to be community property.|
|Does a deed taken in the name of one spouse as sole and separate property create separate property?||No. Title does not determine the character of the property. It is rebuttably presumed to be community property.|
|Does the state recognize pre or post marital property characterization agreements?||Yes.|
|What are the property characterization agreements called?||Premarital or ante nuptial agreements or post marital contracts.|
|Are property characterizations agreements required to be in writing?||Agreements must be in writing to be effective against the Internal Revenue Service.|
|Are property characterization agreements valid against creditors?||Yes, but case by case analysis required. Agreement must conform to required state law formalities, and terms of agreement must be mutually observed by parties. Fraudulent conveyance and nominee/alter ego laws can be applied.|
|What property is available to satisfy a premarital federal tax obligation assessed against only one spouse?||50% of community property and all separate property of liable spouse.|
|What property is available to satisfy a post marital federal tax obligation assessed against only one spouse?||100% of all community property and all separate property of liable spouse.|
|Nevada Community Property law: NRS Chapter 123 * Schulman v. Schulman, 92 Nev. 707, 716-17, 558 P.2d 525, 530-31 (1976)|
Nevada Community Property Law. Source: IRS and Bills.com
Nevada Doctrine of Necessaries
Nevada residents who wrestle with a spousal debt question must know community property law and the doctrine of necessaries to understand their liability for a spouse’s debt. Nevada’s doctrine of necessaries law is not part of community property law, but it may be very important to you.
The doctrine of necessaries is a law giving creditors a right to collect a certain type of debt from a debtor’s spouse or the parent of a minor child. Some states repealed their doctrine of necessaries laws. Nevada has not. To learn if Nevada’s doctrine of necessaries rule compels you to pay your spouse’s debts, read the Bills.com article Doctrine of Necessaries Rules For All States.
Mortgages, credit cards, student loans, personal loans, and auto loans are common types of debts. According to the NY Federal Reserve total household debt as of Q3 2023 was $17.291 trillion. Housing debt totaled $12.489 trillion and non-housing debt was $4.802 trillion.
According to data gathered by Urban.org from a sample of credit reports, about 26% of people in the US have some kind of debt in collections. The median debt in collections is $1,739. Student loans and auto loans are common types of debt. Of people holding student debt, approximately 8% had student loans in collections. The national Auto/Retail debt delinquency rate was 4%.
Each state has its rate of delinquency and share of debts in collections. For example, in Minnesota credit card delinquency rate was 2%, and the median credit card debt was $453.
While many households can comfortably pay off their debt, it is clear that many people are struggling with debt. Make sure that you analyze your situation and find the best debt payoff solutions to match your situation.