In any divorce proceeding, the issue of how to divide marital property, assets and debts must be resolved. By reading this overview on property division under Arizona’s community property laws, you’ll have a better understanding of how assets and debts are allocated in a divorce or legal separation.
Separate Property and Community Property
In an Arizona divorce, there must be an equitable distribution of the couple’s marital property and assets. In general, community property is divided equally between the spouses, as they both have an undivided half interest in the community. If not an exact 50/50 division, then community property must be divided fairly and equitably depending upon the circumstances.
We need to discuss two basic property forms before we go any further: separate property and community property. Separate property is not subject to division in a divorce, although the parties can always agree otherwise. Community property, which is marital property, is subject to division in a divorce.
What is Community Property?
You now know that community property is subject to division during dissolution of marriage proceedings. But what is it? Simply stated, community property is marital property. Community property includes all assets, all property, accumulated during the marriage, regardless of whether the asset is in one spouse’s name or the other.
What is Separate Property?
In general, an asset acquired during the marriage will likely be community property and subject to division between the spouses. There are a few exceptions, though. These exceptions are limited to instances where the asset was either owned prior to the marriage, or was acquired by gift or inheritance during the marriage.
An asset that is separate property is not a part of the marital estate and will not be subject to division in dissolution proceedings. In extremely simple terms, if an asset was acquired prior to the marriage, it may remain separate property at the time of a divorce.
Marital Debts are Community Property
As with assets, community debts are also divided and distributed between the spouses in a dissolution of marriage proceeding. And as with assets, there are separate debts and community debts. 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.
Agreements on Property Division
The parties are always free to agree on the designation of an asset as the separate property of one spouse or the community property of both spouses and the division thereof — this is a part of the negotiation of a divorce. Parties are encouraged to reach as many agreements as possible, always keeping in mind their long term goals. In the event parties are unable to reach an agreement on the division of an item of property, asset or debt, the family court will make a final determination that must be abided by.