In the United States, community property is a legal term that refers to marital property acquired during a marriage. It’s an important part of dividing property in the case of a divorce for married couples in certain states.
The 9 community property states are Arizona, California, Texas, New Mexico, Idaho, Louisiana, Nevada, Wisconsin, and Washington.
In these nine states (and the District of Columbia), all income earned by either spouse during the marriage, as well as property acquired with that income, is considered community property.
The rules are different in each state but generally speaking, both spouses have an equal interest in all of the community property.
Is All Property Acquired During a Marriage Considered Community Property in Arizona?
In Arizona, community property is defined as all property acquired, other than property acquired by gift or inheritance, during a marriage by either spouse. It includes income derived from that property and the increase in value of non-income producing property.
In Arizona, a married person can own separate property if that property was acquired before the marriage or received by a spouse by a gift or inheritance. Even property titled in only one spouses name, such as a car titled in one spouse’s name, is community property if acquired during a marriage.
The Community Property Rules Change If There is a Dissolution of Marriage
If a married couple divorces, the state’s community property rules change.
After divorce, each spouse is entitled to one-half of the total value of all community property acquired during the marriage. It does not matter which spouse owns the property.
The spouses are also entitled to one-half of any increase in value of non-income producing community property during the marriage. This includes items such as a house that is improved by remodeling.
In addition, each spouse is entitled to one-half of the income from community property during the marriage. This includes income earned on money or property, such as interest income from a bank account.
The spouses are entitled to their separate property. The spouse who owns the separate property is free to keep it or sell it after divorce.
So, what happens when someone moves from a state that does not have community property laws to a state that is a community property state, such as Arizona. Many people don’t realize that moving between states can have a big impact on the characterization and division of their marital property when a divorce occurs in the community property state after a move.
In general, there are two types of property law systems in the United States: common law and community property. Common law is the older system, and it is used in most states in the country. Community property is a newer system, and it is only used in a handful of states.
If you move from a common law state to a community property state, your property will be reclassified as community property. This could have some major consequences in the event of a divorce. For example, if you move from Texas to Arizona, your assets will be subject to Arizona’s community property laws instead of Texas’ common law laws.
It’s important to understand the differences between these two systems before you make any decisions about moving states. If you’re not sure which system your state uses, contact an Arizona family law attorney for more information about Arizona divorce laws.
What if I own property in multiple states?
If you own property in multiple states, it can be difficult to keep track of which state your checking account is in or which bank you should use. Each state has its own community property laws, and they may not all be the same.
To resolve this issue, Arizona statute section 25-318 provides that all property located in a different state will be treated as quasi-community property. As a result, an Arizona judge will treat property in other states the same way it classifies property in Arizona as all being community property.
It’s important to consult with a competent legal counselor versed in community property laws to determine the nature of your financial assets.
Equitable Distribution of Community Property in Arizona
When a couple divorces, the assets and earnings they have acquired during the marriage are often divided equitably. This means that, in most cases, the division is fair and equal. However, in some situations one spouse may be ordered to pay an equalization payment, that may require the use of separate property, to make the settlement more equitable.
Another factor that courts consider when dividing marital assets is whether one spouse has attempted to hide or conceal any property from their partner. In Arizona specifically, courts have the ability to award a spouse 100% of an asset for intentional and fraudulent behavior. This ensures that both parties are treated fairly during divorce proceedings.
Property Division in Community Property States
Not All Property Is Marital Property
In community property states, any property acquired by a couple during the course of their marriage is considered marital property and is typically divided equally between the spouses in a divorce. This includes assets such as real estate, vehicles, and bank accounts.
However, there are some exceptions to this rule. Property that was acquired before the marriage or after the separation is not typically subject to division. Additionally, courts may award specific assets to one spouse over another if it is determined that doing so would be equitable.
Community and Separate Income
When it comes to income and taxes, there are two types of income: community and separate. Community income is income that is shared with your spouse, while separate income is income that you keep for yourself.
If you’re married and living in a state where community property laws apply, then you may file a tax return for both spouses. However, only one spouse would have to pay taxes on the community income.
What If There’s a Prenup?
If a couple has a prenuptial agreement, it will overrule the community property law. Judges typically accept these agreements as proof that the couple came to an agreement other than a 50/50 split of their assets, regardless of where they live. This is important to know if you are getting married in a community property state, like Arizona.
It’s All About the Domicile
There are many factors that go into determining a person’s domicile. The most important factor is the couple’s intent–that is, where do they intend to live? Other factors include:
-Where you vote
-Where you live most often
-Your business and social ties
If one of the states in which you have homes is a community property state, then it’s likely that your home is also subject to community property law as well. Community property law applies to the domicile of a couple, regardless of where they live. It’s important to know the proper domicile in order to determine assets that would be divided in the event of divorce.
Property in Multiple States
When it comes to property, sometimes people own assets in more than one state. This can be a tricky situation when it comes to splitting up those assets in the event of a divorce. In general, there are nine community property states.
Property purchased in a state that is not a community property state is included in the assets to be split. For example, if you purchase a home in Texas (a non-community property state), that home will be divided between you and your spouse during a divorce proceeding in Arizona (a community property state).
Property purchased with funds earned in a community property state is automatically considered by law to be community property, regardless of where it was purchased or located. If you earn income as an employee in Arizona and then buy a home in Nevada (a non-community property state), the home will still be considered community property because the money used to purchase it was earned while living within a community property state.
Community Property and Taxes
When you’re married and living in a community property state, the law says that all the income and assets of the marriage are considered mutually owned. This includes money earned by either spouse, as well as any property (including cars and houses).
This can have some important implications when it comes to filing your taxes. For example, if you file separately instead of jointly, you may end up paying more in taxes. You’ll also need to follow community property laws even if you’re separated but still legally married.
If one spouse doesn’t pay their share of taxes, the other might have to add that person’s income to their own tax return. And if you share money with a spouse with whom you do not live for the entire year, they may need to pay more in taxes.
Exceptions to Community Property in Arizona
There are a few exceptions to community property in the United States. One such example is when one spouse can prove that they have made a “gift” of their separate property to the other spouse. This essentially means that the gift was given without any strings attached and with the intent for it to remain separate property.
Another exception occurs when spouses inherit money or property from outside of the marriage. The inheritance would then be considered separate property and not subject to division during a divorce settlement. Additionally, any debts incurred prior to getting married will also typically be classified as separate debt–meaning only the individual who accrued the debt is responsible for paying it back.
Finally, if you purchase an item with money you earned before getting married, that purchase will likely fall under your category of separate property. This includes anything bought with pre-marital funds, no matter how small or insignificant it may seem at first glance!
If you have questions about community property rules in Arizona, you should seriously consider contacting the attorneys at Hildebrand Law, PC. Our Arizona community property and family law attorneys have over 100 years of combined experience successfully representing clients in community property and family law cases.
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 community property or family law case around today.
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