This is the next article in my discussion on how prenuptial agreements can impact a Nevada marriage. My last article discussed the fact that prenuptial agreements cannot include child custody provisions in our state. Such provisions would violate Nevada’s revised statutes and would also be seen as being against public policy. Moreover, the inclusion of such provisions may result in other parts of a prenup being found unenforceable. An experienced attorney can assist you with drafting an enforceable agreement which fits your needs. In this article, I will be discussing how a prenup can help to prevent income tax problems. If you or a loved one are in need of assistance then contact my office today to speak with a Las Vegas lawyer.
Nevada prenuptial agreements are considered by the IRS for tax purposes
Nevada is a community property state. This means that any income earned by each spouse, during the marriage, is considered as belonging to the “community.” This also means that most property acquired during the marriage, as well as certain asset appreciation, will be considered community in nature. This can be highly problematic for tax purposes. If one spouse enters the marriage with pre-existing tax problems, the IRS may attach the community component of any earnings during an audit. The same goes for community property. This can result in the couple losing significant income, which could have been preserved through proper planning.
Consider the following example. Mike and Mindy decide to get married without a prenuptial agreement. Mike earns $400,000 per year at his job and owns his home, which is secured by a $200,000 mortgage. Two years after the marriage, Mindy is audited and the IRS informs the couple that she owes $100,000 in taxes. Mike’s $400k per year income is considered “community” in nature, meaning that $200,000 belongs to Mindy. The IRS may attach this amount out of Mike’s pay. Moreover, since community funds are being used to pay the mortgage then the IRS may be able to assert an interest against the home.
The foregoing scenario could likely have been prevented through a properly drafted prenuptial agreement. Suppose the parties had entered into an agreement stating that all earnings of each spouse shall be considered separate property and that the residence would remain Mike’s separate property. Now suppose that the spouses maintained separate bank accounts and Mike made the monthly mortgage payments from his account. Under these facts, Mike’s earnings and real estate would likely be “separate” for tax purposes and the IRS would not be able to touch them. This would assist Mindy when it comes time to negotiate payment terms, or even a debt reduction, with the IRS. It is important to remember, however, that how any tax issue will be handled is always going to depend on the specifics of the situation.
Discuss your situation with a Las Vegas attorney before signing a prenuptial agreement
If you have tax issues then it is important that you discuss the impact of a prenuptial agreement with an attorney before making assumptions. Whether money or property will be considered community property will be a fact specific question. Counsel can assist you with determining whether a prenup will be beneficial for your situation. Signing an agreement which does not grant you the needed protection, or when one is simply not necessary, can lead to a larger host of problems. As a Las Vegas family law lawyer, I am able to assist with such situations. If you or a loved one are in need of assistance then contact my office online or by telephone today to schedule an initial consultation.
I assist parties throughout the southern part of the state. This includes those in North Las Vegas, Boulder City, Summerlin, and Henderson.