Unfair Separation Agreement in Arizona
People are free to enter into written separation agreements in Arizona. Sometime people who enter into such agreements later feel the separation agreement is unfair. The question becomes what can you do if you entered into an unfair separation agreement in Arizona.
Well, the Arizona Court of Appeals in the published case of Buckholtz vs. Buckholtz answered the question of whether an unfair separation agreement is enforceable in Arizona.
In the Buckholtz case, Husband and Wife entered into a separation agreement. That agreement provided that Husband would be awarded the marital home and his military retirement benefits and Wife would be awarded her 401(k)as the division of marital property.
The house and Wife’s 401(k) were community property. The military retirement benefit was earned by Husband prior to marriage and, therefore, was his sole and separate property. It was unclear to the Arizona Court of Appeals whether Husband knew or did not realize his military retirement was his sole and separate property when he entered into the separation agreement.
Another confusing factor, in this case, was Husband taking a loan against the home for approximately one half of the equity in the home, which he paid to Wife despite the home being awarded to him and there is no provision in the agreement for Husband to pay Wife any equity in the home.
Can the Court Consider Sole and Separate Property When Determining if the Agreement is Unfair
The Court of Appeals held that a trial court must first determine if the agreement is enforceable. It must then determine if the separation agreement is “unfair”. This is a much different standard that is applied to a court dividing property when there is no separation agreement existing between the parties.
When there is no agreement between the parties regarding the division of their assets or debts in divorce in Arizona, the court must divide property fairly and equitably, which usually equates to an equal division of assets.
The other question raised in this appeal was whether the trial court could consider the amount of sole and separate property owned by either spouse when determining if a separation agreement is unfair. The Arizona Court of Appeals held that a trial court could consider the amount of separate property each spouse owned when the entered into their separation agreement if the parties considered that separate property when they entered the agreement. If there was no separation agreement, a court cannot otherwise consider the value or amount of separate property either spouse owns when dividing community property in a divorce.
The Court of Appeals also held both parties must, however, have an understanding of what property is community property and what property is separate property when the entered into the agreement. If the court finds one of the spouses did not understand what property was community property versus sole and separate property, it can find the separation agreement to be unfair.
A Separation Agreement can be Unequal and Still be Fair
In this case, Wife ended up with 50% of the equity in the home awarded to Husband. She also received 100% of her 401(k). These were both community assets, so Wife received much more of the community assets in the separation agreement. Husband received his military retirement, but that would have been awarded to him as his sole and separate property anyway. So, the separation agreement was definitely not an equal division of community assets.
The Arizona Court of Appeals pointed to a string of appellate cases in which an unequal division of assets was found to be fair given the circumstances of those cases. So, it held an unequal division of community assets can still be considered to be fair in a separation agreement. The Court of Appeals also pointed out that the determination of whether the agreement is unfair must focus on the date the agreement was reached and not some later date.
Contact our experienced Phoenix and Scottsdale Arizona divorce attorneys at (480)305-8300 to discuss your Arizona divorce case.
Chris Hildebrand wrote this article about separation agreements in Arizona to ensure everyone has access to information about divorce laws in Arizona. Chris is a divorce attorney at Hildebrand Law, PC. He has over 24 years of Arizona family law experience and has received multiple awards, including US News and World Report “Top Arizona Divorce Attorneys”, Phoenix Magazine “Top Divorce Law Firms”, and Arizona Foothills Magazine “Best of the Valley” award. He believes the policies and procedures he uses to get his clients through a divorce should all be guided by the principles of honesty, integrity, and actually caring about what his clients are going through in a divorce.