Friday, 15 March 2013 17:21

Arizona Community Property

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In an Arizona divorce, the court does not necessarily equally divide the property between the husband and wife. The law does not require the divorcing couple to sell every community property asset and equally divide the proceeds. Arizona’s statutes require the court to divide the community property "equitably." Arizona courts have held that "equitable" does not necessary mean "equal," but equal is usually most equitable. Still, there are many circumstances that will require an unequal division of community property.

When dividing assets in an Arizona divorce, the court first identifies all sole and separate property. Sole and separate property is property acquired by a spouse before marriage, after the date of service of a divorce petition, or property acquired by a spouse during the marriage by gift, devise or descent. Sole and separate property is not divisible in an Arizona divorce but is affirmed to the spouse who brought the property into the marriage or who acquired it by gift, devise or descent during the marriage. The property acquired during the marriage and not by gift, devise, or descent is generally community property and therefore divisible in an Arizona divorce.

Arizona divorce courts generally divide the community property and debts such that each party has roughly the same net worth after the divorce. For example, a couple may have a house valued at $300,000 with a mortgage balance of $200,000 (for a net value of $100,000); 401(k) and IRA accounts with a total balance of $100,000; and $50,000 in savings. The Court does not have to order the parties to sell the house and evenly divide the net proceeds, equally divide the investments accounts, and evenly divide the bank accounts. The court could award one party the house subject to the mortgage and half the cash, while awarding the other party the investment accounts and half the cash. Each party would receive assets with a net value of $125,000.

This example is overly simple, but it illustrates the point that Arizona courts will not necessarily break up every asset. The goal is to make the overall division of assets and debts fair.

On March 1, 2013, the Arizona Supreme Court held that the same principle applies when one spouse dies. In In re Kirkes, the husband died, leaving most of his community property IRA via beneficiary designation to his son from a previous marriage. The decedent’s widow sued for 50% of the IRA. The trial court ruled for the widow, but the Court of Appeals reversed, holding that as long as Gail received at least 50% of all community property, which she did, she was not entitled to 50% of each individual asset (including the IRA). The Arizona Supreme Court affirmed the Court of Appeals’ ruling, adopting essentially the same rule in Arizona probate cases as in Arizona divorce cases.

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