Arizona Community Property Laws
What is Community Property in Arizona
Arizona community property laws provide that, with a few exceptions, all property acquired by either spouse during a marriage is community property.
Specifically, Arizona Revised Statute Section 25-211 provides that “all property acquired by either husband or wife during the marriage is the community property of the husband and wife except for property that is acquired gift, devise, or descent or acquired after service of a petition for dissolution of marriage, legal separation or annulment resulting in a final decree of dissolution of marriage, legal separation, or annulment.”
Is Arizona a Community Property State
Many people have questions about Arizona community property laws and want to know if Arizona is a community property state. The short answer is, yes, Arizona is a community property state.
There are only nine states in the country that are community property states, including Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Alaska.
At the core of community property principles are that each spouse has equal ownership and control over all community property acquired during the parties’ marriage.
Arizona Revised Statute Section 25-318 provides that the court shall fairly and equitably divide all community property and quasi-community property in a divorce, legal separation, or even if the marriage is later annulled by the court.
Quasi-Community Property in Arizona
Assets acquired in a community property state are, by definition, community property.
However, property purchased by a married couple who lived in a non-community property state are not, by definition, community property. That property is, instead, considered by law in Arizona to be quasi-community property.
An Arizona divorce court treats such quasi-property as if it was acquired in a community property state.
An interesting bankruptcy decision in the case of In re Janis supported the application of quasi-community property in Arizona.
The court in the Janis case confirmed a condominium located in Hawaii by an Arizona married couple constituted quasi-community property even though the law in Hawaii did not have community property laws.
Do Community Property Laws Apply to Debts in Arizona
Arizona’s community property laws also apply to debts. So, any debts incurred during marriage are, generally, community debts and will be equally divided in an Arizona divorce or legal separation. Correspondingly, any debts owed by either spouse prior to marriage will remain the sole and separate debt of each spouse.
However, there are numerous exceptions to the general rule that debts incurred during the marriage are community debts. For example, a loan taken out during marriage to refinance a spouse’s sole and separate home will remain the sole and separate debt of the spouse owning that separate home.
When Does Community Property End in Arizona
The creation of community property ends in Arizona when a Petition for Divorce, Legal Separation or Annulment is filed and served on the other spouse, so long as the case ultimately results in a final divorce, legal separation or annulment.
If the spouses abandon their divorce, legal separation or annulment case, all of the property acquired by either spouse after the initial petition was filed and served on the other spouse will be community property.
Are Separate Bank Accounts Community Property in Arizona
Bank accounts opened during a marriage are community property if the money in the accounts was earned during the marriage. It doesn’t matter whether the bank account is only in the name of one of the spouse’s or is jointly owned by the parties.
However, any bank accounts owned by either party prior to the date of marriage will be the separate property of the spouse who owned that bank account prior to marriage.
Problems can occur when a spouse deposits community money into a separate bank account or, conversely, when a spouse deposits sole and separate money into a community bank account.
In such cases, separate and community money are considered to be commingled requiring a financial expert to attempt to trace those funds when dividing money in bank accounts.
Social Security Income is Not Community Property
Social security benefits are created by federal law in the Social Security Act. The Social Security Act, correspondingly, provides that a person’s social security benefits are non-transferrable or assignable.
Court’s in Arizona have interpreted that federal law as prohibiting a family court judge from dividing either parties’ social security benefits in a divorce. Specifically, a state court is preempted by federal law from dividing either spouse’s social security benefits.
However, the Arizona Court of Appeals has supported a judge’s decision to award an unequal division of a retirement account based upon the fact that one spouse would receive social security benefits upon retirement while the other spouse, who participated in a federal retirement plan, would not receive any social security benefits.
How is Community Property Divided in a Divorce in Arizona
Arizona Revised Statute Section 25-318(A) requires all community property to be divided equitable, though not necessarily in-kind, and without regard to marital misconduct.
That statute has been construed to mean a court must equally, or as closely as equally as possible, divide all community property acquired during marriage through the date a petition for divorce, legal separation, or annulment is filed and served on one of the spouses.
Although it may be easy to determine how much community money was in a bank account when the initial petition is served, it is not as easy to determine the equity in a home, the parties’ interests in a community property business, or the marital interest in retirement accounts.
Divorce attorneys will oftentimes employ the services of qualified appraisers to determine the value of the community property during a divorce in Arizona. The parties can then agree upon a division of their community assets.
If the proposed division is not equal, the parties can agree or the court can order one of the spouses to pay the other spouse a property equalization payment to make the division of property fair and equitable. Alternatively, the court can order the community property to be sold with the proceeds from that sale equally divided between the spouses.
Can a Spouse Kick You Out of the House During a Divorce in Arizona
Either party may file a motion for temporary orders requesting exclusive use and possession of the marital home. Also, a spouse who has been the victim of domestic violence can obtain an Order of Protection in which the judge orders the other spouse not to return to the marital home. So, yes, a judge can kick you out of the house during a divorce in Arizona.
Who Gets the House in a Divorce in Arizona
In most cases, the spouses will agree on who will be awarded the house in a divorce, the amount of community equity in the home, and the amount the spouse keeping the home must pay the other spouse for his or her one half share of that equity.
If the parties cannot agree on the equity, they will typically get an appraisal completed to resolve the issue of dividing the equity in the home.
If the parties do not agree on who will get the house in a divorce, the court will either award the house to one of the spouses, subject to that spouse paying the other spouse for his or her interest in the home, or will order the home to be sold.
However, if the house is the sole and separate property of one of the spouses, the court must award the home to the spouse who owns it as his or her sole and separate property.
What is Sole and Separate Property in Arizona
Sole and separate property is all property owned by either spouse prior to marriage or acquired by gift or inheritance during that marriage, as well as the increase in value of those sole and separate assets. This goes the same for debts.
However, the spouse who claims a piece of property is his or her sole and separate property has the burden of proving that fact by “clear and convincing” evidence.
The cases interpreting the “clear and convincing” evidentiary standard have ruled that this burden is not met by the conflicting testimony of the two spouses but must be proven by written evidence or the admission of the other spouse.
Community Liens in Sole and Separate Property
Although a judge must award each spouse their sole and separate property, the community may have a community lien in the sole and separate property of the other spouse.
A community lien is created when community property is used to pay for or improve the separate property of one of the spouses.
For example, sometimes people will choose to live in a home owned by one of the spouses before the parties were married. That house remains the separate property of the spouse who owned the property prior to marriage.
However, the community would have a community lien against the separate property to the extent monies earned during the marriage were used to pay the mortgage or make improvements on the home.
Also, the community may have a lien against a spouse’s sole and separate business if that business increases in value and/or produces more income than before the marriage.
If that increased value or pay was not due to the efforts of the spouse during the marriage, then both the increased value and increased income remain the sole and separate property of that spouse.
However, if that increase in value is wholly or even partly due to the efforts of the spouse during the marriage, then the community would have a community lien.
The value of that community lien would be the increase in value or income of the business to the extent attributable to the spouse’s efforts during the marriage.
However, there is a defense to compensating the community for community liens. A court can conclude the community was fairly compensated for that community lien during the marriage.
To learn more about community liens in separate property, please read our article entitled “Community Liens in Sole and Separate Property in Arizona” discussing the Arizona Court of Appeals’ decision in the Potthoff v. Potthoff case.
You should consult with an experienced and qualified family law attorney to properly calculate the value of community liens in an Arizona divorce.
Gifts of Separate Property to Community Property in Arizona
A spouse owning sole and separate property can change that separate property into community property. This typically occurs when a spouse uses sole and separate property as a down payment on a home that is then titled in both spouses’ names. It can also occur if a spouse deposits his or her separate property into a bank account titled in both parties’ names.
If this occurs, the spouse that used his or her separate property in such a manner has the burden of tracing those funds into the account and convincing the judge he or she did not intend to gift those funds to the community.
They also have to trace those funds accurately or the judge will rule that the funds were so commingled to the extent the court cannot segregate the separate funds from the community funds such that all of the funds will be treated as community property.
Spouses in Arizona are permitted to change the legal characterization of their property either intentionally or unintentionally.
For example, a spouse may intentionally gift their separate property to the community.
A gift of separate property can occur when a spouse adds the other spouse’s name ‘s name to the deed of a home owned by the other spouse before marriage.
A gift of separate property can also occur when someone uses their sole and separate money to purchase a house titled in both spouses’ names.
The Arizona Court of Appeals in the Flowers case found a spouse had gifted his sole and separate home to the community.
Despite that finding, the court upheld an award of 100% of that home to the spouse who originally owned it as sole and separate property.
The court found it was fair and equitable to do so.
Another common way a spouse converts separate property into community property is when a spouse commingles separate property with community property.
Separate property that is so commingled to the extent it is impossible to distinguish becomes community property.
Commingling separate property commonly occurs in bank and investment accounts when a spouse commingles paychecks earned during the marriage with funds held in a sole and separate account.
Commingling issues are very complicated.
For example, a spouse buys a car from an account he owned prior to marriage.
He does not put any paychecks he earned during the marriage into the account.
He then buys a car with funds in that separate account.
The account and the car are that spouse’s separate property.
In another example, that same spouse buys the same car with funds from the same account.
However, he has been depositing his paychecks earned during the marriage into that account.
His commingling in that account likely turned it into a community property account.
The car purchased from that account is now likely community property.
If you need information about community property laws in Arizona, you should seriously consider contacting the attorneys at Hildebrand Law, PC. Our Arizona community property attorneys have over 100 years of combined experience successfully representing clients in divorce cases in Arizona.
Our family law firm has earned numerous awards such as US News and World Reports Best Arizona Family Law Firm, US News and World Report Best Divorce Attorneys, “Best of the Valley” by Arizona Foothills readers, and “Best Arizona Divorce Law Firms” by North Scottsdale Magazine.
Call us today at (480)305-8300 or reach out to us through our appointment scheduling form to schedule your personalized consultation and turn your Arizona community property case around today.
Chris Hildebrand wrote the information on this page about Arizona community property laws in Arizona to ensure everyone has access to information about family law in Arizona.
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