Arizona Property Division FAQs

Property Division FAQs

What is Community Property?

All property acquired by either spouse during the marriage is community property — the marital property shared equally by husband and wife. The exceptions are:  property acquired by gift, devise, or descent; and property acquired after service of a petition for dissolution, legal separation, or annulment when the petition results in a final decree. When a spouse commingles, or mixes, his or her separate property in with marital property, it may be transmuted into community property. Most couples will have some transmuted property to consider in their property division.

What is separate property?

The separate property of a spouse includes the real property and personal property owned by that spouse before the marriage, acquired by that spouse during the marriage by gift, devise, or descent, as well as the increased value, rents, issues, and profits on that property. Property acquired by a spouse after service of a petition for dissolution of marriage, legal separation, or annulment is also that spouse’s separate property when the petition results in a final decree.

What is equitable distribution of community property?

In a divorce, there is an equal and equitable distribution of the marital property. Community property is divided equally between the spouses — they each have an undivided one-half interest. If not a precise 50/50 split, then the community property is divided fairly and equitably under the parties’ unique circumstances. What is equitable depends in part on the kind and nature of the marital property being divided. The judge has considerable discretion on the division and distribution of community assets.

How will the court distribute my property in the divorce?

The character of property is not always obvious and the value of the property must be established. If yours is a high-asset divorce case, then it is very likely that some litigation may be involved to determine the character and value of certain assets. To establish asset valuation in complex cases, we use qualified experts like the following: forensic accountants, business valuators, personal property appraisers, real estate appraisers and realty agents.

Does Asset Acquisition Determine the Character of Property?

Generally, an asset receives its characterization as separate or community property at the time of acquisition. That designation is not altered as a result of a subsequent marriage. However, when community funds are used to pay a mortgage or used to make improvements to the separate real property owned by one spouse, the non-owning spouse is entitled to reimbursement for the community money spent on the other spouse’s separate property.

What is the meaning of transmutation of property?

To transmute property means to convert it into another form. The transmutation of separate property means converting what started as separate property into community property. The methods of transmuting separate property into community property are easily understood. Transmutation can be accomplished by agreement between the spouses, by gift from the owning spouse to the community, or by commingling the separate property with community property so much so that it loses its prior character as separate property.

Am I entitled to a portion of my spouse’s retirement benefits?

Yes, if the retirement benefits are derived from wages earned during the marriage. Wages are considered to be community property and subject to division in a divorce. Each party’s deferred employment compensation in the form of a qualified pension, 401k, or IRA, is community property and must be divided. The pension division is accomplished with a Qualified Domestic Relations Order (QDRO). The QDRO orders the retirement plan administrator to distribute a specified percentage of the participant-spouse’s benefit to the alternate payee-spouse.

Are debts a community obligation?

There are separate debts and community debts. As with assets, community debts are divided and distributed between the spouses in a dissolution of marriage proceeding. Generally, if a debt was incurred prior to the marriage, it remains a separate debt and isn’t a shared obligation. That is also the case with debts incurred by one spouse after the divorce action is initiated, although there are exceptions. For the most part, any debts that arose during the marriage will be allocated as community debts and, therefore, will be divided equitably between the parties in the divorce.

Should I change my estate plan after the divorce is final?

Yes, you should. The instruments that you should consider in your post-divorce estate plan include the following: life insurance, Last Will and Testament, Inter vivos Trust, General Power of Attorney, Healthcare Power of Attorney and Living Will. You may prepare changes to your estate plan during the divorce, but executing some of those changes before your divorce is final may violate the preliminary injunction.