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Divorce and Community Property in AZ
Divorcing spouses often have many questions about community property. Many people aren’t quite sure what community property actually means while others seek to understand how community property might apply to their specific situation. Mediators at The Aurit Center for Divorce Mediation are happy to explain the Arizona divorce process, answer questions regarding Arizona community property law, and explain the various options available to divorcing spouses in Arizona.
The Aurit Center offers the following community property information to help you make informed decisions..
What is Community Property in Arizona?
Community property, in Arizona, is defined as all property acquired by either spouse during the marriage and further states that community property is the property of the spouses, with some exceptions. Community property can also be referred to as marital property.
Each spouse has equal control and responsibility regarding community property. Community property applies to assets, debts, and income accumulated during the marriage.
How is Property defined?
In the context of divorce, referred to as dissolution of marriage in Arizona courts, or legal separation, property refers to: real estate, personal property, vehicles, wages, medical bills, bank accounts, retirement accounts, investment income, intellectual property, loans, credit card debts, community debts, furniture, art, and much more.
Tangible items include: personal property that can be physically touched or moved, such as vehicles, jewelry, furniture, art, etc.
Intangible items include: personal property that can not be physically touched, usually held by electronic means, such as, bank accounts, insurance policies, stocks, retirement accounts, etc.
HOW MEDIATION WORKS
Our simple, four-step process
Hear about our straight-forward Arizona divorce process, have all your questions answered, and learn about the next steps.
We File the Petition
You will avoid the often hurtful process of “being served.” Instead, we file your divorce Petition without conflict and your process moves forward.
We Help You Reach Agreements
You, not the judge, remain in control of your terms. Your mediator will identify the issues, explain Arizona law, and help you reach your best possible agreement.
We File the Consent Decree
Your divorce is finalized when we file your consent decree with the court, without ever going to court.
What is Commingling?
In general, property that is deemed separate property remains separate during and after a marriage. However, Commingling occurs when properties, that are separate property, are mixed with community property.
What is Transmutation?
If separate properties are commingled with community property, and the origin of the separate properties can no longer be traced, they may be deemed to have transmuted into, or to have become community property. If separate property and community property are placed in the same account, the separate property must be distinguishable from the community property to avoid transmutation.
How do Arizona Courts Divide Community Property?
Arizona law does not consider non-monetary contributions, such as household chores or childcare, when dividing property. When determining division of property, Arizona courts are guided by when and how the property was acquired, and whose name is listed on the title of the real property.
What is Partial Community Property?
When property is not clearly community property, or one spouse’s separate property, (acquired by one spouse before marriage or acquired during the marriage by gift or inheritance), it may be considered partial community property.
For instance, when one spouse uses pre-marital savings to finance a purchase made as a married couple, part or all of the purchased item may be considered partial community property. Arizona is one the few states where the courts may also divide assets earned prior to the marriage, in spite of any title of ownership.
How is Community Property Divided in Litigation?
In a litigated divorce, the courts, and sometimes a judge, make(s) the final decisions about how community property will be divided. In most cases, this results in the courts deciding upon a 50/50 division of property between the spouses.
How is Community Property Divided in Mediation?
In mediation, spouses remain in control of their terms and are guided through the process of creating a personal property settlement agreement, which is a legally-binding contract detailing how the community property will be divided as mutually agreed upon by the spouses. While in litigation, divorce attorneys argue the case and a judge determines property division at their own discretion.
What is Property Valuation?
As you prepare for mediation, you will gather financial information about the current value of your property and about any outstanding debt against said property. This information will result in your property valuation. In mediation, spouses can set the date upon which their valuation will be established. Spouses can also agree as to how the valuation will be made.
Regarding valuation of their home, spouses can agree upon an arbitrary amount, they can determine an amount based upon internet real estate value (ex. Zillow), or they may agree to have a real estate professional provide them with a valuation via a formal appraisal. In mediation, spouses stay in control of the process of valuation and decisions resulting from the valuation.
What if One Spouse Wants to Remain in the Home?
The marital home is frequently the most valuable community asset and it can be divided in several ways. When one spouse wants to stay in the home, they can buy-out their spouse’s investment in the home. In order to complete a buy-out, the spouse desiring to stay in the home may need to refinance the home on their own.
In other situations, spouses may allocate the home to one spouse, while giving community property of comparable value to the other. Regarding each and every division of community property, spouses can reach personalized, unique, and creative agreements in mediation.
What is Separate Property?
There are a few specific situations when property acquired during a marriage is considered to be the separate property of one spouse. Separate assets and separate debts might include: receipt of property due to gift or inheritance and the resulting rents, issues and profits of that property, proceeds of vested pension prior to marriage, property purchases using separate property, and personal injury awards.
How do Prenuptials and Post Nuptials Affect Division of Community Property?
Pre- or post-nuptial agreements regarding community property can be waived if the spouses mutually agree. However, prenuptial property division agreements can take precedence over Arizona property division law.
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What if One Spouse Doesn’t Disclose All of Their Finances?
Intentional failure to disclose information relating to assets, debts or income may be found by the court to acts of fraud or perjury.
In mediation, spouses can seek legal advice at any time. Arizona property division orders are legally binding and enforceable. If your spouse fails to comply, you can consult a family law attorney and your ex-spouse could be charged with contempt of court.
In Arizona, Can One Spouse Remove the Other from the Marital Home?
If spouses purchased the home together, the house belongs to both of them and each spouse has access to the home. However, either spouse may temporarily be awarded exclusive use and possession of the property, during a divorce proceeding. Usually, they must show that physical or emotional harm may otherwise result. A spouse may also be awarded exclusive use of a property during an order of protection proceeding.
In mediation, spouses reach agreements together on who, if anyone, will remain in the home during the divorce process, and when the transition will occur. Temporary financial agreements are reached to allow for stability during the transitions of divorce.
How Long do Spouses Have to be Married to Get Half of the Other Spouse’s Retirement?
Retirement accounts, like other assets acquired during a marriage, are considered community property and equal interest is shared by spouses. The interest shared in the account depends upon when the account was first started.
If a retirement account was started during a marriage, then upon divorce, Arizona law would deem the value of the account as equally shared by the spouses. On the other hand, a retirement account that is started prior to the marriage, but then contributed to during the marriage (with what would be deemed community properties), is considered to be partially separate property and partially community property.
What if One Spouse’s Name is Not on the Home Title?
Even if your name is not on the deed to your home, if the home was acquired during your marriage, it is considered community property in Arizona. When purchasing the home, if you signed a disclaimer deed, the home is likely to be considered the separate property of your spouse. The home will also be considered the separate property of your spouse if they acquired it prior to your marriage.
However, if community funds were used to the home’s mortgage, you may have an equitable interest in the home. In mediation, the Drahos formula, under Arizona case law, would be used to determine each spouse’s interest in the equity.
Additionally, if separate property acquired before the marriage becomes titled in both spouse’s names during the marriage, the residence has likely become community property.
What about Getting Legal Advice During Mediation?
Though most divorce mediation is conducted pro se, meaning both spouses are unrepresented by attorneys, mediation participants are always welcome to seek legal advice during the mediation process. While consulting with an attorney is not required, many feel comforted having an attorney to consult with during their process and to have review their divorce documents.
What are the Tax Consequences of Division of Community Property?
Generally, there are little or no tax consequences associated with dividing community property, so long as the final documents clearly outline that the division has occurred due to divorce. It is important that spouses consult with a CPA or other tax specialist prior to division of assets or signing of their final documents to understand any and all tax implications.
What Happens with Community Property During a Legal Separation?
Legal separation functions just as a divorce functions in virtually every way. There are mainly two distinctions: 1) the spouses remained legally married in a legal separation, and 2) legal separation sometimes affords spouses the ability to continue sharing a healthcare plan. Other than those two circumstances, legal separation and divorce are practically identical, including how they handle the division of community property. Community property is treated the same under Arizona law regardless of whether spouses choose to be legally separated or divorced. Community property is viewed as jointly owned–each spouse having an equal, 50% interest–in the eyes of the court. In mediation, spouses are not required to divide all community property evenly. In mediation,they can agree to whatever division they believe is most fair.
What is the Right of Survivorship?
If joint tenants of a property each have a right of survivorship, if/when either of them pass away, the other would inherit the deceased’s ownership interest in the property. Joint tenancy requires that all tenants hold an equal interest in the property and that their interest be created at the same time. So, rather than the deceased’s interest in the property passing by will or intestacy, the deceased’s ownership interest passes equally to all of the joint tenants with right of survivorship.
What are Community Property Debts and What is Marital Waste?
Both spouses are liable for debts incurred during their marriage, regardless of whether the debt was accumulated jointly or in their individual name. In certain circumstances, spouse’s may also be liable for their spouse’s premarital debt.
Arizona courts do not consider property used toward a spouse’s education as community property, except in circumstances where educational debt directly benefits the community or earning capacity of either spouse. Courts do give consideration to dissipated marital properties; i.e., if one spouse has a gambling problem and gambles a large sum of assets, unbeknownst to the other spouse, then this expenditure may be accounted for in the final division of assets and debts.
In mediation, when this is the case, spouses find acceptable ways to acknowledge the past and find financial solutions that are mutually agreeable to both people.