It is important to understand how property will be divided in a divorce. Arizona is one of only nine states in the country that follows a relatively strict doctrine of “community property.” Under state law, any property acquired by either spouse during the marriage is considered joint property. However, the acquisition and division of property are not always straightforward.
It’s important to understand the scope of Arizona community property division in divorce cases.
Understanding Arizona’s Community Property Laws
When couples decide to pursue a divorce, one of the most critical stages of the process involves ensuring that marital assets are divided as equitably as possible. Divorce is a complex, often emotional process that should not be further complicated by worries about whether you are going to receive or keep your fair share of everything you have acquired since the marriage began. Under the state’s community property laws, all debts, income, and other marital assets must be divided equitably between both spouses.
What Does Community Property Mean?
Community property refers to any assets, properties, and debt that are acquired by either spouse throughout the duration of a marriage, with the exception of gifts and inheritances. It frequently involves the marital home, income from both spouses, bank accounts, retirement investments, and even vehicles. During a divorce, community property is split equitably between both spouses.
Community property is wholly different from separate property, which includes any property that either spouse owned before the marriage and any property acquired during the marriage as a formal gift or inheritance. During a divorce, separate property does not qualify for asset division but instead remains with the spouse who initially owned it. This includes any financial gains on said property.
How Arizona Courts View Property Division
In Arizona, state courts approach asset division with one key goal in mind: equitable division of property. Through equitable division, the goal is to divide marital property equitably, which is not always the same as equal. The principle of equitable division is intended to ensure the roughly equivalent division of property treats both spouses fairly. This includes dividing marital property and debt alike.
To attain an equitable division of assets, both spouses must first submit a full inventory of all assets and debts. A judge will assess each spouse’s needs and contributions to the marriage and help ensure an equitable division. If you and your spouse have worked out an agreement during the negotiation or mediation stage, you can present it to the judge. However, the judge is not legally required to abide by the agreement; they can reject any unfair agreement.
How Is Property Divided in a Divorce in Arizona?
While some couples cannot agree on how to divide their property and rely on the court to divide their property for them, most address this issue with a prenuptial agreement or during the negotiation stage. Both parties must submit financial disclosure documents listing all community and separate assets.
Evidence can include:
- Bank and investment account statements
- Retirement benefits statements
- Deeds and other ownership documents
- Inheritance documents
- Gift documents
- Debt statements, including credit card statements, loan documents, and other evidence
- Personal lists of all other assets, including vehicles, collectibles, antiques, art, and any other assets
In most cases, without a prenuptial agreement, divorce attorneys work together with the divorcing couple to equitably divide assets and debts. If an agreement cannot be reached, a Family Court judge will make a ruling regarding the division. An Arizona divorce lawyer can help you ensure a fair decision in either situation.
Factors Considered by Arizona Courts
A divorce is not just the end of your marriage; it’s the disentanglement of two lives, including financial arrangements. Arizona courts approach factors like debt, prenuptial agreements, and less formal spousal agreements as dictated by Arizona state law.
Debt
Just as assets are divided equitably, joint debt will be, too. Under community property laws, each spouse will be assigned an equitable share of the debt. However, debt accrued after the divorce process began will be assigned to the spouse who initiated the debt. Similarly, debt in one party’s name will likely be assigned to that party. If both parties’ names are on a debt, it may be refinanced or paid off using community assets or assigned a monetary value and divided equally. Any debts associated with an asset owned by the couple, including homes, vehicles, and other property, may be refinanced or restructured to be assigned to one spouse.
Once debts are assigned as equitably as possible, the court will examine the overall division of assets to ensure that each spouse is treated fairly. For example, if one spouse is assigned more debt than the other, they may also receive additional community property. As the court cannot require debt repayment in one lump sum, the spouses may become responsible for the debt again if the other party cannot repay it.
Spousal Agreements
Many couples choose to avoid a complicated division of assets or assert ownership of certain premarital assets during divorce by creating a prenuptial agreement. A prenuptial agreement, also called a prenup, is a legally binding document the spouses agree upon prior to getting married. It lays out a fair and balanced division of assets for both parties in the event of a divorce, as well as plans for spousal support, estate planning, and even stipulations in the event of infidelity.
Prenuptial agreements, along with postnuptial agreements, can help people with considerable assets protect them during a divorce. These spousal agreements can also help spouses ensure a fair division of property.
The court will enforce any valid spousal agreement, provided that it:
- Was signed voluntarily by both spouses
- Was created and signed without undue influence upon either spouse
- Was drafted in writing and reviewed by each spouse’s attorney
- Contains full disclosure of both spouses’ financial information
- Contains fair terms that are not unjust toward either spouse
Any unethical or invalid spousal agreement will be rejected by the court, and assets will remain subject to equitable division according to community property laws in Arizona.
What About Sole and Separate Property?
Many divorcing couples grow concerned about their ability to retain property they owned before the marriage. Sole property, property owned by only one person, is a term that applies to separate property during an Arizona divorce. Separate property owned before the marriage or acquired during the marriage via gift or inheritance is not subject to division during a divorce. Only property obtained during the marriage is eligible for asset division. For this reason, it is essential to keep detailed records of ownership.
To protect a gift, inheritance, or other separate property from being divided in the divorce, it is vital to keep detailed records of financial transfers. Keep records that clearly state the date and time of the inheritance or gift deposit, and consider placing the funds in a trust.
Common Challenges in Property Division
Regrettably, divorce comes with a significant set of challenges, particularly during property division. Determining the value of certain assets can be difficult, and dividing them can be less than straightforward, especially if both spouses claim ownership. You may experience these common challenges during the property division process.
Hidden Assets: the Importance of Financial Transparency
Achieving an equitable division of assets requires both spouses to remain open and wholly transparent about their finances. As property division commences and each spouse discloses their financial situation, they must acknowledge the full value of all assets, debts, and any financial windfalls that may not be well known. Hiding assets to prevent their division in a divorce in Arizona is illegal.
If the court discovers that individuals are deliberately hiding assets to avoid division or influence property division, they could face a number of distinct penalties. Penalties include paying the other spouse’s legal fees, forfeiture of the hidden assets, being found in contempt of court, or even perjury charges. Consult with a skilled divorce and property division attorney if you believe your soon-to-be-ex-spouse is concealing assets ahead of your property division process.
Disputes Over High-Value Assets
High-value assets are often the subject of disputes, as both spouses tend to want to retain ownership of these items or properties. High-value assets may include real estate, marketable investments, stock in certain businesses, and substantial retirement funds. As with other assets, the court must first determine whether high-value assets are community property or separate property. If there is a prenup in place that circumvents the court’s involvement in asset division, it will be considered.
Businesses
In general, businesses established during the course of the marriage and businesses owned by both spouses are considered community property and divided equitably. For this to occur, the business must undergo a valuation of all assets and debts. The spouses may agree to continue on in co-ownership; one spouse can buy out the other’s interest, or the business can be sold and the proceeds divided equitably.
Businesses owned prior to the marriage are considered separate property unless the owner spouse gives the other spouse ownership. The proceeds generated by the business during the course of the marriage are likely community property and subject to division.
Retirement and Investment Accounts
Retirement and investment accounts are typically considered community property in Arizona. This designation is in place because the individual’s contribution to them comes from financial earnings that are community funds during the marriage. Thus, the assets they generate during the marriage are subject to equitable division.
Property Division Frequently Asked Questions
Couples divorcing in Arizona frequently have questions regarding what they can expect, particularly when it comes to property division. Our qualified divorce attorneys have answered three of the most common.
Mediation is one avenue couples frequently use to complete negotiations. A neutral mediator can oversee negotiations and suggest potential solutions without court intervention.
Protecting Your Assets During Divorce
Protecting assets from division during a divorce can be done with proper safeguards. To do so, it’s best to consult with an attorney experienced in family law.
Steps to Safeguard Separate Property
You can ensure the safety of your separate property in a divorce with these steps:
- Identify the separate property you’d like to protect – property you acquired prior to marriage and property received via gift or inheritance can qualify.
- Document these assets and obtain copies of proof of ownership, including statements from before the marriage, inheritance deposit dates, etc.
- Consider professional valuation of assets like businesses and real property.
- Gather financial records from both spouses.
- Draft a prenuptial or postnuptial agreement that states that the named properties remain solely yours upon divorce and obtain your spouse’s full participation and signature.
- Consider creating an irrevocable trust to hold financial assets.
Why You Need Legal Representation
Each of the above steps should be handled under the guidance of a skilled attorney. An attorney can help you ensure your prenuptial agreement or trust is valid and will be enforced in court. If you are facing a divorce, a divorce lawyer can help you navigate the complex legal process of a divorce, help you negotiate a settlement and divide property, and represent your interests during a tumultuous time in your life.
How Gillespie, Shields & Taylor Can Help With Property Division
The legal team at Gillespie, Shields & Taylor can help you negotiate your property division, reinforce prenuptial agreements, and more.
Experienced in Arizona Family Law
Our firm has over 30 years of experience navigating the ins and outs of Arizona family law cases and negotiating agreeable terms during divorces of all kinds. We know how difficult it can be to divide community property, and we can help you work out a plan that benefits you. Our expertise in Arizona family law is unmatched.
Personalized Support Through Your Divorce Journey
Our legal team works closely with our clients to become familiar with your specific case and build a plan unique to your situation. Having someone by your side who is actively fighting for a fair and equitable outcome for you can make all the difference.
It is vitally important to understand how property division laws work in an Arizona divorce. To learn more about how we can help you with your case, contact Gillespie, Shields & Taylor to schedule a consultation. Our family lawyers can help you develop a plan to ensure a positive outcome for your divorce.
Sources
- Arizona Revised Statutes. (n.d.). § 25-211 – Property acquired during marriage; exceptions. Arizona State Legislature. Retrieved from https://www.azleg.gov/ars/25/00211.htm
Founder, Owner, and Family Law Attorney
Those who know DeeAn Gillespie Strub can describe her in three words: caring, courageous, and competent. Growing up as the oldest of nine children, DeeAn quickly learned leadership and resourcefulness. With both parents as educators, she also acquired a love of learning, and from her mathematician, father learned to think analytically. Following in her parents’ footsteps, her first career step was to become a teacher. It was not long before she determined she could use her teaching skills most effectively in a different arena: the law. She wanted to make a difference for people.