Division of Marital Property and Debt in Arizona

Many Arizona couples find themselves in the midst of a divorce without understanding how marital property is divided. However, the vast majority of couples must divide the property and debts obtained during the marriage when it is time to divorce. Since Arizona is considered a community property state, all marital property and debts are split equitably between the couple, and the property division process is crucial to ensure both spouses receive their fair share.

If you have made the difficult decision to begin the divorce process, having a lawyer explain the next steps and the division of marital property and debt in AZ can greatly reduce your anxiety.

Learn more about the division of assets, debt allocation, and community property in divorces in the state of Arizona and how our property division attorneys can help you.

Understanding Community Property in Arizona

Community property is another term used for nearly all property that was acquired during the time of the marriage. Arizona law dictates how the division of assets, including marital debts, will be split. Because Arizona is what’s known as a “50/50 state,” community property is typically divided approximately equally between the couple, but this is not always the case.

Separate Property

While community property will be distributed evenly to the couple in a divorce, separate property will not. Separate property includes items that were previously owned by one spouse before the marriage took place. It also includes property that has been gifted to only one spouse, as well as inheritances.

Property purchased or earned after the filing of a divorce petition is typically considered separate property. Keeping separate property disconnected from community property is important as the divorce proceeds. Most individuals choose to establish separate bank accounts solely in their name to help ensure they will not be considered part of the marital assets.

Commingled Property

Using separate property during the course of a marriage may mean that it is considered commingled property, which then becomes liable for division during a divorce. This can occur if, for example, one spouse uses their own separate funds to pay for marital property, such as a house. Those funds typically become commingled property.

Tangible vs. Intangible Property

Regardless of whether the property is considered community or separate, it is further classified as either tangible or intangible. Tangible property, or items that can be handled physically, involves things like money, real estate, vehicles, furniture, antiques, jewelry, and appliances. Intangible property cannot be touched and can involve copyright interests, trademarks, or cryptocurrency.

How Is Community Property Divided in a Divorce in Arizona?

In Arizona divorce cases, property division is split according to the equitable distribution rule. This means that the couple’s assets will be divided fairly, which does not always mean that property will be split equally. Because of this rule, dividing property and debt during divorce without the assistance of a lawyer is typically not advisable.

Property Division Steps

Property division in Arizona typically follows these general steps:

Identification of Property

Before community property and debts can be divided, it must first be identified, including all the assets and debts that are subject to be split between the couple. This includes everything that the couple owns together. In most cases, the spouses must create a list of properties along with proof that they are either community or separate property. Sometimes, a forensic accountant will be called upon to trace the necessary documentation.

Evaluation

Once all of the marital property has been accounted for, that property can be evaluated to determine its worth. This can be tricky for certain items and is especially important for high-value items. Some couples may decide to have an appraiser determine the total value.

It is possible to place a monetary amount on most items depending on how much the couple spent on it, the age of the item, and its depreciated value over time. In the event that the couple cannot come to an agreement on what their community property is worth,  a general monetary amount may be attached to help the court come to a decision on how to divide it fairly.

Negotiation

After the value of the property has been assessed, the spouses can discuss how they wish to divide the property. Negotiating what assets you and your spouse wish to keep after the divorce can be difficult if you cannot agree or want the same property. This is an area in which a property division lawyer can assist you.

Distribution

The court will first assign the individuals their own separate property, then divide the assets and debts of the community property as evenly as possible because each spouse is entitled to one half. To determine how to divide these assets fairly, the court will take several factors into consideration, including:

Consideration of Misconduct

While the distribution must be handled fairly, even if marital misconduct is discovered, such as domestic violence, abandonment, or substance abuse, it does not usually affect how assets are divided. One exception to this is if one spouse has been discovered to be wasteful of marital assets. For example, if one spouse chooses to gamble or spend money on an affair, the court may request that the spouse who wasted assets make financial restitution to the other spouse.

Additionally, the court will consider whether either spouse acted unethically and concealed assets. If either spouse hid assets in an attempt to prevent their distribution, they could face penalties from the court or even the criminal justice system. They may be required to accept an inequitable distribution of assets, pay restitution for the hidden asset, pay fines, or face contempt of court charges.

Handling Community Debts in a Divorce

There are several kinds of marital debt that may be amassed while a couple is married. The most common kinds of community debts are mortgages, credit card debt, and loans. This can include student loans, even if the loan was taken out before the couple got married. An auto loan may also be considered marital debt, even if the loan is only in one spouse’s name. The same may be true for medical debt or other debts that have been obtained before the couple got married.

Judges can differ in how they approach the division of debt, depending on the circumstances. In certain cases, one spouse will be given specific debts to pay off individually. If both spouses are financially able to continue paying off debts after the divorce is finalized, then the debts may be divided between them. It is essential for all debts to be assigned to one or both spouses before the divorce is determined to be settled.

Even if property and debt division have been split between the two in the divorce settlement, it is still possible for creditors to come after both spouses in the event that a community debt has not been paid. Because of this, it is wise to pay off as much marital debt as possible before the divorce is finalized. You do not want to be held responsible for additional debts obtained by your spouse while you and your spouse are separated and before the divorce is complete.

If one spouse is buying out the other’s share of the shared home, or if the home is being sold, a refinancing home loan may be a way to achieve an equitable outcome. If you and your spouse own a business together, you may decide to negotiate to buy your spouse’s share of the business so that you become the business’s sole owner.

Division of Certain Assets in Arizona

Dividing certain assets that are not easily split in half, like large pieces of tangible property, must be approached carefully.

Homes

Multiple factors must be considered while dividing a home during a divorce.

These factors include:

In many cases, the couple can come to an agreement on who will keep the house. The receiving spouse can buy out the other spouse or give up other property in the same amount. If not, the court will equitably split the home between the two, which can result in the sale of the home and the distribution of the proceeds.

Investment Properties and Vehicles

Similarly, investment properties and vehicles shared by both spouses are considered community property and must be split as fairly as possible. This may require the spouses to either agree to allow one spouse to own the property or vehicle or to sell them and divide the profits.

Retirements and Pensions

Other assets, such as retirement accounts and pensions, are handled differently as they often cannot be split evenly. Pensions, for example, typically need the approval of a pension administrator to file a Qualified Domestic Relations Order (QDRO) so that money from this account can be given to a spouse.

These assets also have certain tax implications that must be considered during the division process. Retirement accounts also require a QDRO so that money can be transferred to a spouse in the event that they were to receive a portion of that account. If money has to be taken out of a retirement account early, the account holder may be penalized.

Separate Property

Personal belongings, such as your clothes, any gifts given to you, collectibles, family heirlooms, and other items with sentimental value, are nearly always considered separate property. As these items are not considered community property, they are not subject to division.

As marital property division in the divorce process can be difficult, confusing, and overwhelming to handle alone. Having property division attorneys to assist you in your case can help give you clarity and direction and ease your anxiety.

The Role of a Property Division Attorney

Handling a divorce case alone is rarely easy. This is especially true if you and your spouse own several valuable assets and have a large amount of community property that must be distributed. For these reasons, having property division attorneys on your side is essential. Not only do these skilled family law attorneys understand Arizona property division laws and have experience applying the law in court, but they can also help you understand your rights and legal options.

There are many ways that a lawyer can help you in your divorce case.

Property Identification

First, they can assist you in determining all of the marital property that you own, including what is community property, what is separate property, and if any commingled property exists. If you have a prenuptial agreement, the lawyer will help you determine how it will impact your case.

Negotiation

A skilled property division attorney can help you negotiate a fair settlement agreement. Your attorney can meet with your spouse and their attorney to gather information about the property involved and guide you during negotiations.

Litigation

Having legal representation in court can also be of great help to you if you and your spouse are unable to reach an agreement. An attorney can assist you in protecting your valuable assets and make sure that all community debts are distributed equitably. An attorney can also call upon expert witnesses like a forensic accountant or an appraiser to ensure fair valuation and division.

As divorces can be complicated and difficult, it is suggested that you consult with a lawyer as early in the process as possible. Desert Legal Group is here to guide you through the division of marital property and debt in AZ, protect your rights, and offer you legal assistance every step of the way. We have walked many clients through property division cases and have helped them achieve a favorable outcome.

Cory Keith

Attorney Cory Keith is an exceptional legal professional dedicated to providing effective representation for his clients. Driven by the belief in treating others how he would want himself represented, Mr. Keith has earned a name for himself for his unflagging advocacy and compassionate approach to law.

Mr. Keith attended Arizona State University, earning his Bachelor’s in Criminal Justice and Criminology through a full academic scholarship. With outstanding performance, he received another full ride academic scholarship to attend law school, where he demonstrated exceptional leadership abilities by accepting executive roles in various organizations as well as serving as legal clerk at multiple well-respected law firms.

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