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Arizona is 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 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, each spouse has equal ownership and control over all community property acquired during the parties’ marriage.
Arizona Revised Statute Section 25-318 requires a court to divide all community and quasi-community property fairly and equitably. In all divorce, legal separation, or even if the court later annuls the marriage, the court must do so. The parties to a divorce are free to enter into divorce settlement agreements dividing their marital property or the court divide their property for them.
What is Community Property in an Arizona Divorce Case
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.” The only exceptions to that rule are property acquired gift, devise, or descent or earned after service of a divorce petition.
Quasi-Community Property and Arizona Marital Property Laws
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 is not, by definition, community property. Instead, Arizona law consider that property to be quasi-community property.
An Arizona divorce court treats such quasi-community property as if it were 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 was quasi-community property.
The Janis court made that ruling even though the law in Hawaii did not have community property laws.
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 before marriage will remain each spouse’s sole and separate debt.
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 home.
When Does Community Property End in Arizona
The acquisition of community property ends in Arizona when a Petition for Divorce, Legal Separation, or Annulment is filed and served on the other spouse. However, that is true only if the case results in a final divorce, legal separation, or annulment.
Suppose the spouses abandon their divorce, legal separation, or annulment case. In that 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.
Separate Bank Accounts May be Community Property in Arizona
Money in accounts earned during a marriage is community property in Arizona. It doesn’t matter whether the bank account is only in the name of one of the spouses or is owed jointly by the parties.
However, any bank accounts owned by either party before the marriage will be the separate property of the spouse who owned the bank account before marriage.
Problems can occur when a spouse deposits community money into a separate bank account or, conversely, deposits sole and separate money into a community bank account.
In such cases, the commingling of separate and community money may require a financial expert to trace those funds when dividing cash in bank accounts.
Social Security Income is Not Community Property
The federal law in the Social Security Act applies to Social security benefits. The Social Security Act provides that a person’s social security benefits are non-transferable or assignable.
Courts in Arizona have interpreted that federal law as prohibiting a family court judge from dividing either parties’ social security benefits in a divorce.
Expressly, federal law preempts a state court from dividing either spouse’s social security benefits.
However, the Arizona Court of Appeals upheld an unequal division of a retirement account when one spouse would receive social security benefits upon retirement when 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
A court must divide community property equitably, though not necessarily in-kind, without regard to marital misconduct, according to Arizona Revised Statute 25-318(A).
That statute requires a court to divide all community property equitably, which usually means equally.
It may be easy to determine how much community money was in a bank account when a spouse serves the initial petition. It is not as easy to decide on the equity in a home, the parties’ interests in a community property business, or the marital interest in retirement accounts.
Divorce attorneys will often employ qualified appraisers’ services 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, a spouse can pay 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
Unequal Division of Community Property as a Sanction Because of Misconduct
Both spouses must disclose information and documentation regarding their debts and assets in a divorce.
The court will order a final division and distribution of assets. Spouses will then be required to turn over certain items of community property to the other spouse.
So, what can happens if a spouse refuses to provide information and documentation regarding their assets and debts or refuses to exchange property awarded to the other spouse?
The Court of Appeals in the unpublished case of Lindzon v. Lindzon provided an answer to that question.
In the Lindzon case, one of the spouses failed to comply with the instructions and deadlines to retrieve personal property from the other spouse.
In response, the trial judge found, as a sanction for the non-compliance, that spouse forfeited those assets to the other spouse. The Arizona Court of Appeals concluded that such a sanction was valid
So, the court may sanction a spouse by awarding a disproportionate amount of community property to the other spouse in Arizona.
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.
The judge can include an order in the Order of Protection preventing the other spouse from returning to the home.
A judge may also issue a Temporary Order giving one spouse exclusive and continuing use of the home to the exclusion of the other spouse.
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 keep the home and the amount the other spouse will receive for their share of the equity in that home.
Suppose the parties cannot agree on the equity. In that case, they will typically get an appraisal completed to resolve the issue of dividing the equity in the home.
Suppose the parties do not agree on who will get the house in a divorce. In that case, the court will either award the home to one spouse or order the home sold.
If the court grants the home to one spouse, the court will order that spouse to pay the other spouse their share of the home equity. The court will also, typically, order the spouse to refinance the mortgage on the home to remove the other spouse from the obligation on that mortgage.
However, suppose the house is the sole and separate property of one of the spouses. In that case, the court must award the home to the spouse who owns it as their sole and separate property.
What is Sole and Separate Property in Arizona
Property owned by a spouse before marriage or acquired by gift or inheritance during a marriage and the increase in value of those sole and separate assets are sole and separate property. The same rule applies to debts.
However, the spouse who claims a piece of property is their 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 a spouse must present written evidence or the admission of the other spouse to meet this high burden of proof.
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.
Making payments on or improving a spouse’s separate property with community funds may create a community lien.
For example, sometimes, people will choose to live in a home owned by one of the spouses before the parties are married. That house remains the separate property of the spouse who owned the property before marriage.
However, using community funds to pay the mortgage or improve the home may result in a community lien against the house.
Also, the community may have a lien against a spouse’s sole and separate business if that business increases in value or produces more income than before the marriage.
Suppose that increased value or pay was not due to the spouse’s efforts during the marriage. In that case, both the increased value and increased income remain that spouse’s sole and separate property.
However, if that increase in value is wholly or even partly due to the spouse’s efforts 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 that using that separate asset fairly paid the spouse for that community lien during the marriage.
You should consult an experienced and qualified family law attorney to calculate community lien values in an Arizona divorce.
Gifts of Separate Property to Community Property in Arizona
A spouse owning sole and separate property can change that particular property into community property.
Converting separate property into community property typically occurs when a spouse buys a home titled in both spouses’ names but uses sole and separate money as a down payment.
It can also occur if a spouse deposits their separate property into a bank account titled in both parties names.
If this occurs, the spouse has the burden of tracing those funds into the account and convincing the judge they did not intend to gift those funds to the community.
They also have to trace those funds accurately. The judge may rule the funds were so commingled with community property that the court cannot segregate the separate funds from the community funds. All of the funds are now 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 separate property gift can occur when a spouse adds the other spouse’s name to the deed of a home owned by the other spouse before marriage.
A separate property gift can also occur when someone uses their sole and separate money to purchase a house titled in both spouses’ names.
In the Flowers case, the Arizona Court of Appeals 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 their separate property into community property is when they commingle their separate property with community property.
Separate property so commingled to the extent it is impossible to distinguish the separate portion from the community portion 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 using funds in an account he owned before 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 the spouse’s separate property.
In another example, that same spouse buys the same car with funds from the same account.
However, he deposited 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 contact the attorneys at Hildebrand Law, PC.
Our Arizona community property attorneys have over 100 years of combined experience successfully representing clients in dividing community property 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.
Arizona Community Property Questions:
Is Arizona a 50 50 state in a divorce?
Arizona is a 50 50 state in a divorce as most judges equally divide all community property, although a court may award an unequal division of community property if it is fair to do so.
What is a wife entitled to in a divorce in Arizona?
A wife is entitled to half the community assets, half of the community debts, and possibly spousal maintenance and child support in a divorce in Arizona.
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.
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