Property division can become challenging for divorcing couples. However, this need not be a challenge. And If you and the soon-to-be-ex cannot come to good terms on your own, a court will have to do it for you. Under Arizona’s community property law, debts and assets accumulated during a marriage belong to both parties 50/50 in the absence of a prenuptial or postnuptial agreement that says otherwise. Arizonian family courts emphasize fairness when dividing up a property. Unlike in some states, the property may not be divided equally 50/50, but equitably in the eyes of the judge assigned to your case. This can sometimes mean 55/45 or 60/40 or 40/60—every case is unique.
No matter what the facts, you will have to hire a talented divorce attorney in Scottsdale, Phoenix or your local area in the state. Absent years of litigation experience, you likely won’t be able to capably represent your interests in court without a deep knowledge of divorce and property laws in the state. If you are undergoing a process of dividing property in a divorce, here are some important items you should be aware of:
Determine if the Property Belongs to the Community or the Separate Category
There is a very clear distinction between community and separate property under Arizona law. Separate property is assets a spouse owned before marriage, inherited solely during the marriage, was gifted solely during the marriage, or purchased alone during the marriage with sole and separate finances. A prenuptial or postnuptial contract may also designate that certain items are to be treated as separate property. Absent these facts, the law presumes all property and all debt, acquired or originated during the marriage, is community property.
Courts in Arizona only have jurisdiction over community property, not either spouse’s sole and separate property. Each party will have to provide evidence for separate property claims in the form of financial documents. It is possible that property that was originally separate later becomes community property during the marriage. For example, a house purchased by one spouse before marriage may become community property following the marriage if both spouses names are later placed on the recorded deed.
The reason that each is different is that the distinction between community and separate property during the marriage can be blurry. Some spouses may have unknowingly turned separate assets into community property by the “commingling” process, where two assets are combined. A bank account owned by one spouse before marriage becomes marital property if the other spouse makes deposits to it later with community income. Sometimes assets are partially community and partially separate, such as houses and retirement accounts. A business that one spouse operated but later received contributions from the other spouse after marriage can fall into this category. A seasoned lawyer can walk you through these issues, and advance them in a court of law.
Set Values for Property
Regardless of whether community or separate property, all assets and debts must be assigned a monetary value before equitable division. The two spouses can do this themselves, or a court can do it in case the parties cannot agree on values. Typically appraisals are used to set values of real assets, like houses, antiques, or vehicles. The toughest asset to value can sometimes be retirement accounts. You may have to hire a financial professional like an actuary to ascertain the value of a retirement account and the growth in value of such retirement assets since the original marriage date.
The Process of Dividing Property
You can see the first section above that determining whether a property is community or separate can be complicated. Ideally, both parties come to an agreement out of court. But this rarely happens when multiple assets are in question and the stakes involve hundreds of thousands of dollars or more.
Courts may divide up property in multiple ways. In the case of property that is partially separate, the court may offer a spouse the option of buying out the remaining portion from the other. In some cases, it may be recommended to mutually sell the assets and divide the proceeds. Some property, like family homes, can be co-owned even following a divorce if children are living there or visiting each year.
Arizona courts typically divide property approximately equally among the divorcing partners. There are only a handful of exceptions to the rule. For example, if one spouse is known to have squandered money through irresponsible activities like gambling or drug use, the court may rule in favor of the other. In the case of property under massive debt, the court may rule against the spouse responsible for the debt. At the end of the day, you will need the guidance and stewardship of experienced legal counsel to navigate these issues for you.
The following information will assist you in comprehending who owns what in terms of marital property.
Common Law Property and Marital Property States
The majority of states adhere to common law property. Consequently, what does it mean to reside in a common law property state, and who owns what following a divorce? The term “common law” is simply a term used to determine marital property ownership (property acquired during marriage). Under the common law system, property acquired by one member of a married couple is solely owned by that individual.
Obviously, if the title or deed to a piece of property is placed in the names of both spouses, then the property belongs to both partners. If the names of both spouses appear on the title, each spouse owns a one-half interest.
Distribution of property upon death or divorce: When one spouse dies, their separate property is distributed according to their will or through probate (in the absence of a will). The distribution of marital property depends on how ownership is shared between the spouses. If they hold property in “joint tenancy with the right of survivorship” or “tenancy by the entirety,” the surviving spouse inherits the property. This right is independent of the provisions of the spouse’s will.
However, if the property was owned as “tenancy in common,” then the deceased spouse’s will may direct the property to someone other than the surviving spouse. Some property does not have a title or deed. In this instance, the owner is typically the person who paid for or received the property as a gift.
In the event of a divorce or legal separation, the court will decide how the couple’s property will be divided. Obviously, the couple can enter into a premarital agreement detailing the division of marital assets upon divorce.
States with Marital and Community Property
Louisiana, Arizona, California, Texas, Washington, Idaho, Nevada, New Mexico, and Wisconsin are the states with community property. In states with community property, all assets acquired during the marriage are regarded as “community property.”
In states with community property, both spouses own the marital property equally (50/50). This marital property consists of earnings, all property acquired with those earnings, and all marital debts. Community property commences at the time of marriage and terminates when a couple physically separates with the intent to no longer be married. Therefore, any earnings or debts accruing after this date will be considered separate property.
Any assets acquired prior to the marriage are regarded as separate property and belong solely to their original owner. A spouse may transfer the title of any separate property to the other spouse (gift) or to the community property (community property) (making a spouse an account holder on bank account). Couples can also commingle their separate property with their community property, for instance by adding funds from before the marriage to the funds that constitute the community property.
Spouses may not transfer, modify, or eliminate a whole piece of community property without the consent of the other spouse, but they may manage their own portion. However, the entire piece includes the interest of the other spouse. In other words, that spouse’s share of the property cannot be alienated.
Separate property consists of
- prior to the marriage, only one spouse owned the marital home.
- Gifts made to only one spouse prior to or during the marriage
- inherited property by only one spouse
- Community property consists of
- Earnings of either spouse during the marriage
- Items purchased with money earned by either spouse during the marriage
- Unidentifiable separate property that has become entangled with common property.
Distribution of property upon death or divorce:
When one spouse dies, his or her half of the community property is transferred to the surviving spouse. Their separate property may be bequeathed to whomever they choose in accordance with their will or through probate in the absence of a will. Numerous states with community property provide an interest known as “community property with the right of survivorship.”
Under this doctrine, if a couple holds title or deed to a piece of property, typically a home, then upon the death of one spouse, the title automatically transfers to the surviving spouse without the need for court proceedings.
In the event of a divorce or legal separation, all community property is divided equally (50/50). The separate property of each spouse is distributed to the spouse who owns it, rather than being divided equally.
Sometimes, economic circumstances necessitate awarding certain assets entirely to one spouse, but each spouse still receives 50 percent of the total economic value of all community property. This is most prevalent in married households. Due to the impracticality of dividing a home in half, courts frequently award one spouse the home and the other spouse other assets with a value equal to half the value of the home.
Before the marriage, the couple may enter into an agreement outlining the division of marital property upon divorce.
Exceptions to the rule of equal division:
- Prior to or during a pending divorce, one spouse misappropriates the community property.
- One partner carries educational debts. This is the same as debt incurred separately. The spouse retains their GSL loans upon divorce.
- One spouse incurred tort liability NOT as a result of activity performed for the benefit of the community of marriage.
- Personal injury awards are considered community property during the marriage, but are awarded to the injured spouse upon divorce.
- “Negative community” refers to a situation in which the community’s liabilities and debts exceed the assets available to cover them. Here, the relative ability of the spouses to pay the debt is taken into account. The objective here is to safeguard creditors.
What is Whose? Obtain Assistance with Your Marital Property Issues
Dividing marital property upon divorce or the demise of a spouse is never an easy subject to broach. Despite the fact that the specifics of property division depend on the state in which you reside, it can be quite confusing. However, you are not required to figure out the law on your own. Consider contacting an experienced divorce attorney in your area to discuss your options.