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Property Title's Impact on Property Classification in Divorce


With few exceptions, property acquired during the marriage is community property. This is the case in Nevada and is the case in most states today. Generally speaking, whether title is held in one or the other spouse's name is irrelevant. If the property was acquired during the marriage it will be deemed community property with few exceptions. That being said, in many states, there are times in which a transfer of title from one spouse to the other spouse, from one spouse to the spouses jointly, or from the spouses jointly to one spouse individually may create a presumption that the property transfer constitutes a gift. Thus if this gift presumption is not overcome then this property may transmute from community property into separate property or from separate property into community property. The change in title effectively signifies an intent to make a gift from one estate to the other.

Transmutation is the conversion of separate property into community property or community property into separate property. Transmutation often occurs when both separate property and community property are so mixed, "commingled", that the separate or community nature of the property can no longer be identified. In this instance what may have been separate property is deemed to be community property subject to division. This is typical in longer marriages where money has moved several times over a long period of time thus making it difficult for experts to trace out the separate property to its origins.

Transmutation can also take place in instances when you have a gift of property from one estate to the other. This gift may be made by express gift, meaning that there is a written agreement between the parties to change the nature of the property. An express agreement will be viewed in the same light as any other contract. There must be an offer, an acceptance, and consideration for this gift. Without these things there will be no express agreement. These express agreements are typically proven when the courts find evidence of actual negotiations. Reconciliation agreements are common places to find such transmutation. In these instances it is common for one party to transfer separate property over to the community in exchange for continuation of the marriage. An unambiguous document may be necessary to prove such agreement. Alternatively, in many states, a transmutation from community to separate property or from separate property to community property may occur by way of express gift. The common way for this to happen is for the parties to convey marital property to one party as that spouse's "separate property". However, the title transfer itself may raise a presumption which can be overcome by looking at the intent of the donor. For instance, if it can be shown that the purpose in effectuation the title transfer was purely for purposes of obtaining better financing then the gift presumption will be overcome. Oftentimes parties effectuate this title transfer for estate planning purposes as well. This ulterior motive may be sufficient to overcome the presumption that the transfer was a gift.

In most states the law does not presume that property purchased with community funds and placed solely into one spouses name becomes separate property. However, most states do make a presumption that property purchased with separate funds but titled in both spouse's names becomes community property. This is called the joint title gift presumption. Similar to above, if the party who used separate property to purchase an asset titled mutually wishes to claim that such property is still separate then that party has the burden of proving that there was no gift to the marital estate. Again, this presumption can be overcome by showing that title was placed into both names for financing purposes or estate planning purposes. In the best case scenario there would be a written document signed by the parties indicating that the transfer was not intended to be a gift. However, these documents aren't typically prepared as the spouses often don't foresee future consequences of these actions.

Categories: Family Law