ARE PROCEEDS FROM A PERSONAL INJURY SETTLEMENT COMMUNITY PROPERTY?
Nevada Revised Statute 123.130 defines separate property as all property owned before marriage, and that acquired by the spouse afterwards by gift, devise, descent or by an award for personal injury damages, including rents, issues and profits. NRS 123.130(1) and (2). This definition, however, is not as simple as it may appear. Many personal injury settlements consist of part community property and part separate property. Generally, the lost wages component of a personal injury settlement is community property and the “pain and suffering” component is separate property. NRS 123.121. Damages for the loss of comfort and society are the separate property of the spouse who suffers such loss. Damages awarded for the loss of services and medical expenses are community property. Spouses who receive personal injury proceeds for pain and suffering must keep the proceeds separate from community property because if they are commingled and court may consider them transmuted and characterize it as community property.
IS ACCURTED VACATION AND SICK TIME A DIVISIBLE COMMUNITY ASSET?
Until recently, there were no Nevada cases specifically addressing whether a spouse’s vacation or sick time is divisible as a community asset in divorce. While other community property states had determined that vacation and sick time was community property, the Nevada Supreme Court had never addressed the issue until its recent case in Kilgore v. Kilgore, 135 Nev.Ad.Op. 47 (October 3, 2019).
In Kilgore, the Nevada Supreme Court confirmed that vacation and sick pay “are forms of deferred compensation. If the work is performed during marriage, compensation for that work belongs to the community. The court also found that if the vacation and sick pay was not addressed in the decree of divorce a party could go back to have it divided and res judicate does not apply.
TRACING COMMINGLED SEPARATE PROPERTY FUNDS
In Schmanski v. Schmanski, 115 Nev. Adv. Op. No. 36 (August 27, 1999), the Nevada Supreme Court held that “NRS 125.150 does not irrevocably transmute separate property placed into joint tenancy into community property.” Where personal property is deposited into a joint account, the gift presumption does not apply. The more appropriate question is whether the separate funds have been transmuted through commingling. This position is supported by statute and case law. It is widely held that “[t]he commingling of separate funds and community funds into one account does not transmute the entire account into a community account so long as the funds remain traceable.” Noble v. Noble, 546 P.2d 358 (1976). “This is especially true where the community funds commingled are negligible in comparison to the separate funds.”
The Nevada Supreme Court has recognized that the mere placement of separate funds into a community or joint account does not constitute a gift. In Malmquist v. Malmquist, 106 Nev. 231, 792 P.2d 372 (1990), the court although not addressing the issue directly, gave no importance to the allegation that a piece of property had been purchased with alleged separate property funds deposited into a joint account. Instead of analyzing whether such a deposit constituted a gift, the court defined two methods of tracing that can be used to maintain the separate nature of such contributions. Specifically, the court was asked to decide whether improvements to separate property were community or separate. The evidence showed that the husband received money from the sale of separate property in the form of a check with his and his wife’s name on it. The check was endorsed by both parties and placed into a joint checking account. At least part of the improvement was then paid from the joint account. The district court found commingling. The Supreme Court stated that “there are two ways to rebut the presumption that commingling funds are community property.” The first is by direct tracing of the source of a particular purchase to the separate property portion of the account, and the second is showing proof that at the time of the purchase all community income was exhausted by family expenses.
The bottom line is while separate proceeds may be traced if placed into a separate account, it is obviously better to maintain separate property in a separate account without adding funds that may arguably be community funds.
TRANSFER OF REAL PROPERTY CREATES REBUTTABLE PRESUMPTION OF GIFT
In Todkill v. Todkill, 88 Nev. 231, 495 P.2d 629 (1972), The Nevada Supreme Court opined that the transfer of title from one spouse to the other creates a presumption of a gift that can only be overcome by clear and convincing evidence. According to the court:
When a husband transfers title to his separate property from his name into his wife’s name, he is presumed to intend a gift to her, even though his original intent was to defraud creditors. Peardon v. Peardon, 65 Nev. 717, 201 P.2d 309 (1948); cf. Peterson v. Brown, 17 Nev. 172, 30 P. 697 (1882). That presumption, while rebuttable, can be overcome only by clear and convincing evidence. The husband has the burden of proof. If the evidence is conflicting the presumption remains. Here, in spite of the testimony of respondent that his transfer of the home and one-sixth of the C.B.C. Inc., stock to the appellant was in trust, she has, through her testimony, raised the issue that the home was a birthday present and that the stock was given to her for her financial security. This raises a conflict in the evidence and the respondent’s evidence is therefore not so clear and convincing as to rebut the presumption of an absolute gift. Peardon v. Peardon, supra. Id. at 237-38, 632-33.
The Nevada Supreme Court in Graham v. Graham, 104 Nev. 473, 760 P.2d 772, 773 (1988) provided additional guidance by hold that a “party who wishes to overcome the presumption may do so by presenting substantial evidence of conduct, expressions or intent at the time of taking or during the holding of the real property.”
Grandparents’ Rights in Nevada
According to the United States Census Bureau 5.8 million grandparents had a grandchild under the age of 18 living in their home. Of those almost one-half had the primary responsibility for the care of their grandchildren. Sixty-four percent of these grandparents are women and 19% of all grandparent caregivers had incomes below the poverty level. In 2000, the first time that such questions on grandparent care were included in the census, 39% of the grandparents had been responsible for the care of their grandchildren for five or more years.
In Nevada, the rights of grandparents, as well as other specific relatives, is governed by NRS 125C.050. Nevada law applies when “a parent of an unmarried minor child” has died, is divorced or separated, or was never married. Further, specific relatives may seek rights of reasonable visitation only if a parent has “denied or unreasonably restricted” visits with the child. Even in that case, there is a rebuttable presumption that granting the visitation rights sought is not in the best interest of the child, which presumption may be overcome only, by clear and convincing evidence, that such visits would be in the child’s best interest.
In sum, before the Nevada legislature changed the “grandparent” statute back in 2001, the courts routinely granted grandparents’ visitation with their grandchildren if there was an existing relationship and the contact would serve the child’s best interest. Since the new legislation, prompted by the U. S. Supreme Court decision in Troxel v. Granville, it has become more difficult for grandparents and other relatives to obtain court ordered rights to visitation. Under the right circumstances, a grandparent or other relative may still obtain court ordered visitation rights, but it is difficult. It should also be noted, however, that if a grandparent, or other third party has an existing court order for custody, the grandparent then stands “in the shoes” of a parent and then the parent has the burden to show that a change of custody would be in the best interest of the child.
What is the Difference Between Physical and Legal Custody in Nevada?
Physical and legal custody are often confused but involve separate legal rights and address different issues. In determining both types of custody, the “sole consideration is the best interest of the child.” Parents are encouraged to cooperate and negotiate a custodial arrangement for their children before going to court and allowing a “stranger” to make the decision. There are no winners in contested custody litigation. It is expensive, neither party is generally satisfied with the result and the children usually suffer.
1. Legal Custody
“Legal custody involves having basic legal responsibility for a child and making major decisions regarding the child, including the child’s health, education, and religious upbringing.” Sole legal custody vests these rights with one parent and while joint legal custody vests this right with both parents. Sole legal custody is extremely rare. There is a presumption in Nevada that parents will share the joint legal custody of their children. “Joint legal custody requires that the parents be able to cooperate, communicate, and compromise to act in the best interest of the child.” In joint legal custody cases, the parents must consult with each other to make major decisions regarding the child’s upbringing. Joint custody can exist regardless of the physical custody arrangement.
2. Physical Custody
Physical custody involves the time that a child physically resides with each parent. During this time, the child lives with the parent and that parent provides supervision for the child and makes the day-to-day decisions regarding the child. It is the public policy of Nevada that minor children have frequent associations and a continuing relationship with both parents and parents sharing the rights and responsibilities of child rearing. Nevada law now has a presumption that the parents will share joint physical custody of their children. The Nevada Supreme Court has defined joint custody as each parent having at least 40% of the time with the child. If a parent does not have 40%, the other parent has primary custody.
Besides the obvious, the physical custody arrangement is important for three reasons. First, it determines the standard for modifying physical custody. It is more difficult to modify a custodial arrangement when one parties has primary physical custody of a child, rather when the parties share physical custody. Second, if the parties share the joint physical custody, it is more difficult for a parent to obtain permission to move out of state with a child than it would be for a parent who has the primary physical custody. Lastly, the physical custody arrangement has a direct impact on the amount of child support awarded in most cases.