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Frequently Asked Questions About Property Division

How will our property be divided? (A.R.S. ?28-211 and A.R.S. ?25-318)

You and your spouse may decide this for yourselves, but it is important to note that Arizona is a community property state. In accordance with Arizona Revised Statute ?25-211, community property is all property acquired during the marriage by the efforts of either party through the date of service of the Petition for Dissolution. The court presumes that each spouse is entitled to 50 percent of the assets acquired during marriage. Also, the courts generally seek to divide debt equitably in a divorce case. This does not automatically mean that each spouse will have 50 percent of the debt assigned to them. The court will take into consideration each spouse?s income, ability to pay debts and issues of waste of community property assets.

Usually, the community property is divided equally. It does not matter that one spouse contributed more than the other. The court may, in rare cases, give one spouse more than one-half because the other has destroyed, sold or given away community property or for other compelling reasons. The court may divide property by ordering it to be sold, or by splitting it between the parties.

If one spouse had property prior to the marriage, but that property has increased in value during the course of the marriage, then the increase in value could be deemed community property and divided between the parties, if the increase came from labor by either spouse during the marriage or expenditure of community funds.

Is everything we own considered community property?

According to Arizona Revised Statute, section 25-211, generally anything that a married couple accumulates during the marriage is considered community property. That is, both spouses own an undivided share of the whole. Exceptions to this general principle include those assets acquired prior to the marriage, by gift, devise (a will) or descent (inheritance). Because the Arizona courts start with a strong presumption that anything acquired during marriage is a community item, the spouse claiming a particular item is not community property has the burden of proving otherwise.

What property is not divided?

According to Arizona Revised Statute ?25-213 ?separate property? cannot be divided by the court. Separate property consists of items owned before the marriage or received as an inheritance or gift during the marriage and kept separate during the marriage.? It is possible for a person to gift his or her separate property to the community?for example, by re-titling the property as community property.

What about the debts?

Arizona Revised Statute ?25-318 provides that debt incurred during the marriage is presumed to be community debt. Generally, the court divides debt equally. Debt incurred by a spouse before the marriage remains the separate debt of that spouse. The court may also order the parties to submit a debt distribution plan. Within thirty (30) days after receipt of a written request for information from a litigant which includes the court name and case number, a creditor shall provide the balance and account status of any debts of either party or both spouses, identified by account number, for which the requesting spouse may be liable to the creditor.

What if my spouse does not pay the community debts as ordered in the final decree? Can our creditors force me to pay?

Yes, Arizona Revised Statute ?25-318 states that a creditor can collect a marital debt from either spouse, regardless of which spouse is ordered to pay the debt by the court. The innocent spouse then has the right to recover from the obligated spouse, unless he or she files bankruptcy. If a party fails to comply with an order to pay debts, the court may enter orders transferring the property of that spouse to compensate the other party.

What happens when the spouses own a business together?

During the divorce process, the court will usually attempt to keep the things the way they presently are when it comes to the day-to-day operations of a family business. A business valuation expert can assess the value of the business during the pendency of the divorce matter. The court, with the input from the business valuation expert, will determine the value of the family business. The spouse that is ultimately awarded the business may be required to pay the other spouse that individual?s share of the business. That amount is normally one-half of the value assigned to the family owned business. You should consult an attorney for this matter.

What if neither of us can afford the house?

This is no different than if you were together. You have the same problems and issues as if you were together (divorce just makes it more difficult). The mortgage company expects both of you to pay. If there is a deficiency judgment because of a line of credit, the creditor will look to both of you to pay, no matter what your divorce agreement says.

Decide who pays for repairs during the dissolution, who should sell and how long they have to sell. If one party agrees to buy out the other party, you need to agree when you appraise the house.

What if one party made the down payment with money earned prior to marriage, but after marriage, put the house deed in both names as joint tenants?

The house is community property and the spouse who made a down payment may have ?gifted? the property to the other spouse. Some courts will award the spouse a return of the down payment and then split the net equity.

What if I paid the down payment, my spouse has lived here during our entire marriage, but her name is not on the deed?

The house most likely remains your sole and separate property, but your spouse has an equitable lien on the house for the community effort put into the house during the marriage that increased its value. You may want to consult an attorney.

My spouse and I purchased the house together, but I made her sign a disclaimer deed two years later when I refinanced the house. The house is all mine, right?

Quite possibly, but while disclaimer deeds are valid, there can be suspect issues. Disclaimer deeds make it look like you were trying to cheat your spouse out of the house. A court will want to know if she was represented by counsel and how much she understood about what she was doing. And again, there is the equitable lien issue as outlined above.

My husband will not get out of the house, and I just filed for divorce.

You will have to file a motion to ask the court for exclusive use of the home. This is discretionary with the judge, and will likely take a month or more to get a hearing; usually, this is part of a temporary orders hearing. If you both own the house, maybe you can negotiate this move. Once one person moves out, the leaving spouse should not come and go in the house without permission of the other spouse. Some judges consider the ?leaving spouse? as moved out of the house until further court order.

Who pays for repairs while our house is for sale?

You can agree that the party living in it pays for everything under a certain amount, such as $100. Any other repairs are split 50-50 and can be reimbursed at the sale. It might be wise to purchase a home warranty to prevent any unexpected expenses.

Who gets the kids? furniture?

This is negotiable, but it should be a consideration if one parent has to buy all new furniture, beds, etc. for the kids in a shared custody arrangement.

What is considered my sole and separate personal property?

Anything you owned prior to marriage, property that you inherited, and usually jewelry given, gifted to you, your sports equipment, your personal electronics, clothing.

Who gets our digital camera?

If you both use it and bought it with community funds, it needs to be divided, along with other property.

Who gets the vehicles if both vehicles have debt and no equity?

Usually whoever gets the vehicle gets the debt. Remember, the lender will not honor your decree; your spouse can ruin your credit if he/she does not pay. There can still be an equitable set-off.

I inherited money when my mom died six years ago and put my husband?s name on the account. Is this money community or my sole and separate money?

This might be considered gifted to him and commingled with community funds. If you can trace the amount, you can have it returned to you. A fair way to handle this is to allow you to get your lump sum deposit back. If there is an issue of commingling, such as you putting other community money into the account, it is discretionary with the judge. Let?s assume that you inherited $100,000 and put it in an account and never did anything else with that account. You should be able to consider it sole and separate and it should be awarded to you.

What if my spouse does not pay the community debts as ordered in the final decree? Can our creditors force me to pay?

Yes, Arizona Revised Statute ?25-318 states that a creditor can collect a marital debt from either spouse, regardless of which spouse is ordered to pay the debt by the court. The innocent spouse then has the right to recover from the obligated spouse, unless he or she files bankruptcy. If a party fails to comply with an order to pay debts, the court may enter orders transferring the property of that spouse to compensate the other party.

I am getting ready to file for divorce. Can I take all the money out of our joint savings account?

No, because although the temporary injunction is not in place, you are intending to file and it is not fair to take all the money. You may take half of the money, and this should not cause any problems in case you have to explain this to a judge.

I won an award for a car accident and put it in an account in my name alone. Do I have to split it during the divorce?

No, a personal injury settlement for pain and suffering is your sole and separate property.

I won a settlement for a car accident and put it in an account with both our names on it. Do I have to split it?

If you can trace the original amount, it will most likely still be considered your sole and separate property. If it is commingled beyond recognition, you will most likely have to split it.

I had stocks before marriage, but bought more stock after marriage. Who gets the stocks?

The stocks you had prior to marriage are your sole and separate property. The stocks that you purchased with community funds are community property.

Community Property

 

Once property is considered community property, it must be divided equitably between the spouses. That is why it is important to determine the characterization of the property at the beginning of the divorce. There may be arguments about whether property is community or not, but most property is fairly easy to characterize. Property includes real property, which is land or a house. Property also includes your furniture, bank accounts, savings account, investments and deferred compensation plans, such as 401Ks or IRAs.

Property for division, however, does not include Social Security benefits. Social Security law governs your Social Security account and it cannot be changed in a divorce decree. If you want to know specific information about your Social Security benefits, you might want to contact the Social Security Administration to find out about your specific income. Most property disputes revolve around houses. For some reason, many couples maintain complicated information regarding when and how a house was purchased and whose name is on the deed. It is important that you know if your name is on your house deed. You can check that on the Internet, courtesy of the Maricopa County Recorder?s Office at recorder.maricopa.gov/.

I am getting ready to file for divorce here in Arizona. Can I take all the money out of our Scottsdale joint savings account?

No, because although the temporary injunction is not in place, you are intending to file and it is not fair to take all the money out of any joint accounts you have in Arizona. You may take half of the money, and this should not cause any problems in case you have to explain this to a judge.

During a divorce in Arizona, what if neither of us can afford the house in Scottsdale?

This is no different than if you were together. You have the same problems and issues as if you were together (divorce just makes it more difficult). The mortgage company expects both of you to pay. If there is a deficiency judgment because of a line of credit, the creditor will look to both of you to pay, no matter what your divorce agreement says. Decide who pays for repairs during the dissolution, who should sell and how long they have to sell. If one party agrees to buy out the other party, you need to agree when you appraise the house.

What if my spouse does not pay the community debts as ordered in the final decree? Can our creditors force me to pay?

Yes, Arizona Revised Statute 25-318 states that a creditor can collect a marital debt from either spouse, regardless of which spouse is ordered to pay the debt by the court. The innocent spouse then has the right to recover from the obligated spouse. If a party fails to comply with an order to pay debts, the court may enter orders transferring the property of that spouse to compensate the other party.

What does a property settlement agreement do?

A Property Settlement Agreement lays out and explains how your property will be divided. If the court ultimately decides how your property will be divided, the property division will be explained in your decree, which is public record and can be read by anyone. If, however, you negotiate and draft a Property Settlement Agreement, you can incorporate this agreement by mere reference in your divorce decree. (This means that your decree will include language referring to your Property Settlement Agreement as the explanation of the property division).

Should you write your agreement or seek the advice of an attorney? It depends on the complexity of your situation. You may consider consulting an attorney so that you understand the family law statutes and how they apply to you. If there is an impasse between you and your partner, you do not need to go to court; you can mediate (settle) your dispute with a mediator, who is preferably an experienced family law attorney.

How do the vehicles get divided during my divorce?

Usually spouses have driven one vehicle and that is the one they want to keep. There may be an adjustment if one vehicle has a greater value than the other. For instance, if the truck has equity of $10,000 and the SUV has equity of $20,000, one person has $10,000 more value than the other. The truck spouse is due an additional $5,000 on his/her side of the ledger (the vehicles together equal $30,000 so each spouse should get a value of $15,000; the truck spouse only has $10,000 in value, so is due an additional $5,000)

What Happens if the House is Community Property? What if it is Sole and Separate?

Option one is one spouse stays in the house and makes all the payments; the parties get the house appraised and decide the value of the house. Then the party who wants to live in the house pays the other spouse half the value of the house. This can be paid with cash in a refinance or can be “horse-traded” with other assets. Option two is the parties can sell the house and split the proceeds equally. The parties can split the costs of upkeep until the sale, or they can decide that one party lives there and makes all payments until the sale. Or, one spouse could move out and then combine all living expenses, with each paying half of those total expenses or each paying their prorated share, according to each party’s income. Option three is one party stays in the house for a predetermined amount of time, such as one to two years, until a refinance must be undertaken.

There are a number of creative ways to determine the division; it is limited only by imagination and the ability to cooperate. The end goal is to split the proceeds 50-50 and not make the process more difficult than it needs to be for either party.

If only one spouse’s name is on the deed, or if one party owned the house prior to the marriage, it might be considered that spouse’s sole and separate property. This can become a complicated legal issue and you should seek the advice of an attorney if you have any questions.

Characterization of Property During a Divorce

The first thing to decide is the character of the property. If it is community, it can be split 50-50. If it is sole and separate, it is yours and does not need to be divided but it must be disclosed. At the end of the divorce, you will want to divide the community property approximately equally. This includes the house, furniture, cars, boat, bank accounts, savings, stocks, investments, pensions and debts. You also need to be aware that each spouse has an obligation to disclose all property under the Rule of Family Law Procedure 49. Hiding assets will not be treated kindly by the court. Even sole and separate property must be disclosed so the other spouse has an opportunity to determine if it really is sole and separate.

How do deferred compensation accounts, 401k, and retirement benefits get divided during a divorce?

The court will split these 50/50 if it was all acquired during the marriage. There is no penalty to divide and the money is not removed from the accounts. After the division, each party is subject to IRS rules for prematurely withdrawing the money. One spouse cannot create a tax liability for the other spouse. The money/account should not be withdrawn during the pending divorce.

A Qualified Domestic Relations Order may be required if you are dividing your deferred compensation, 401k, or retirement benefits. If this is the case, a QDRO expert may be necessary to divide these assets. The QDRO expert will require information concerning the date of your marriage and the date of the plan to value, which is usually the date the QDRO expert actually divides the asset. You will need to contact a QDRO expert for this.

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