Understanding Property Division in Your Divorce
Understanding Property Division in Your Divorce
Every state handles property division in a divorce differently. The State of Arizona operates under a community property law, which creates a presumption that any property acquired during the marriage is community property and is equally owned by the married couple. However, how does this play into a divorce, and how does a court view the exact division of property between two spouses?
As stated previously, community property creates a legal presumption that any property, including real and personal property, acquired by either spouse or jointly during the marriage is owned 50 percent by each spouse. Property can include many different types of assets, too. The property includes real estate, cars, businesses, ownership interests, investments, wages from employment, savings, retirement accounts, bonuses, dividends, pensions, boats, art, jewelry, and more.
Of course, the property division under community property law also includes debt, meaning each spouse equally owns any debt incurred by either spouse during the marriage.
It is always split equally?
Many times, in a relationship, one spouse will have worked more than the other, and that spouse may have actually brought in most of the money that purchased or “earned” the property in question. The higher earner spouse may attempt to argue because he or she earned money in the relationship. He or she owns the assets. However, the courts do not care if one spouse worked while the other did not when it comes to dividing property. Each spouse starts on an equal playing field regarding community property and the presumption of an equal division.
The presumption starts with the idea that everything should be divided equally, but parties can attempt to rebut the presumption and argue that the division should not be equal. The burden is on that party to bring evidence to rebut the presumption. Otherwise, the court will make every effort to finalize an actual, equal division of all assets and debts.
Often, this equal division is not possible, resulting in one spouse receiving more assets than the other. To offset this balance, the court may order an equalization payment, meaning the spouse who received more assets will pay the other a lump sum of money equal to one-half of the difference in value between the assets received. Not everything divides completely equally, and this lump sum payment is a common occurrence, especially if one spouse receives the marital home or his or her retirement account.
What is Considered Community Property?
Not all property owned by the parties is considered community property. If the spouse acquired the property before marriage and did not commingle the asset with other marital assets, this property will be considered sole and separate. For the most part, property acquired during the marriage is presumed to be community property unless the property is acquired by a gift or inheritance or is in exchange for other separate property. If a pre-or post-nuptial agreement governs certain property items, that property will also be considered separate unless the spouses agree otherwise.
If property started as separate, but the spouse made payments on that separate property with community funds, a court may view this as commingling the separate asset with a community asset, thereby making it part of the community property division. Therefore, it is of utmost importance that the separate assets remain separate during the course of the marriage. If the parties are in a long relationship, it can be easy for that once separate asset to become something that both parties equally have a right to own.
One spouse may argue that since he or she used that spouse’s credit to purchase the property, that asset should be given to him or her. The court will not consider this to be the sole evidence in making that determination, just as the court may not rule that just because one party used the asset most of the time, he or she should be awarded that property. A lot of consideration goes into determining which asset or debt goes to which spouse. While this evidence will be taken into consideration, it may not be the sole determining factor.
However, if a debt was incurred primarily for the benefit of one party alone, the court may consider this evidence in determining that the party for whom the debt was incurred should be responsible for payment. For instance, if one party took a student loan out so he or she could go back to get a college or master’s degree, the court may put that debt as that spouse’s responsibility since arguably he or she incurred the debt for his or her sole purpose. If the spouse went back to school to have a higher earning capacity, the court may also view that information as evidence that he or she should be responsible for the student loan.
Many of these decisions are fact-specific, and it is important that the client is working with a family law attorney when preparing a case for property division. If you need a strong advocate in your corner, it is important you contact us today to schedule a consultation to discuss your case. Contact us at (480) 300-6012.