Although adultery can be emotionally devastating, it is usually not relevant to divorce in Arizona.  Arizona is a no-fault divorce state, which means couples can get a divorce without one of them being at fault.  It also means that the court will divide the couple’s property and debt, determine child custody and visitation, and determine child support and spousal maintenance without regard to marital misconduct.

Although adultery is not an issue in itself and is not directly relevant to the divorce, it may be relevant to certain narrow issues.  For example, if one spouse incurs tens of thousands of dollars in credit card debt having an affair, the other spouse can argue that the resulting debt is community waste which did not benefit the marital community and the court should declare the debt to be the other spouse’s separate debt.

Part of the benefit of hiring an attorney for your divorce is having someone who is not emotionally devastated or angry about your divorce and who can analyze the legal issues and give you good legal advice.

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Many people go through a divorce, receive a money judgment against their former spouse for something other than child support or spousal maintenance, and then do not know what to do with it when the other former spouse does not pay the judgment.  Unlike a child support judgment or a spousal maintenance judgment, the State of Arizona will not help you enforce the judgment and you must do so yourself.  Different rules apply to different kinds of judgment, but this article is only about a regular money judgment, such as for property.

The first thing you should do with a money judgment is record it with the county recorder.  Often, the best choice for your second step in collecting a judgment is a wage garnishment.  This depends on whether the judgement debtor has a wage-earning job.  Arizona state law limits the amount that you can garnish from the other party’s paycheck.  Federal law also limits what a judgment creditor may garnish from a judgment creditor’s paycheck, but federal limits are the same as Arizona’s limits. Creditors can only garnish nonexempt wages, and the amount they can take is generally limited to 25% of net pay.

The players in a wage garnishment are the court, the judgment creditor (the person who has the judgment against the other person), the judgment debtor (the person who has a judgment against him or her), and the garnishee (the judgment debtor’s employer).

A wage garnishment is an order from a court that a judgment creditor serves on the garnishee, called a writ of garnishment.  The writ of garnishment requires the judgment debtor’s employer to withhold a certain amount of money from the judgment debtor’s paycheck and send this money directly to the judgment creditor.

A creditor holding a regular money judgment can start a garnishment proceeding when he or she has a judgment signed by the court.  Certain other types of creditors, such as the IRS, the Department of Revenue, a person to whom you owe child support, or an entity holding a defaulted student loan, have different rules.

Arizona law limits how much money a judgment creditor may take from a judgment debtor’s paycheck through a wage garnishment.  A court may issue a writ of garnishment of no more than 25% of the judgment debtor’s non-exempt net earnings; or the amount of a judgment debtor’s non-exempt net weekly earnings that exceed 30 times the federal minimum wage.  "Net earnings" means the judgment debtor’s wages minus deductions that the employer makes that the law requires, such as income tax withholding.  "Non-exempt" earnings means income that is not exempt pursuant to law.  Examples of income that is exempt pursuant to law include Social Security Disability, VA disability, and child support.  There are other examples, but these are the most common examples.

The judgment debtor also has a right to request a hearing to contest the validity of the garnishment.  The judgment creditor can also use the hearing to ask the court to lower the amount that the garnishee withholds from 25% to 15% of his or her net earnings.  Also, only 25% of a judgment debtor’s net earnings is subject to garnishment.  This means that two judgment creditors may not garnish 25% of the judgment debtor’s earnings apiece; only 25% of the judgment debtor’s earnings is subject to garnishment no matter how many judgment creditors are seeking a wage garnishment.

A writ of garnishment is a hassle for many employers and some may rather terminate an employee instead of continue to comply with the writ of garnishment.  However, pursuant to federal law, the garnishee may not terminate the judgment debtor for one garnishment but, federal law does not protect a judgment debtor with two garnishments from termination.  In Arizona, a garnishee cannot fire a judgment debtor because you have a child support withholding order.   Employers may ask new hires, returning employees, or rehired employees to disclose whether they have an existing child support withholding order, but the employer cannot base any hiring or firing decisions on such information.

Not many family law attorneys do collection work on their clients’ judgments that are not for family support.  If you have a money judgment to collect or have someone seeking to collect from you, contact Thomas A. Morton, PLLC for a consultation.

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The distinction between sole and separate property and community property could have significant consequences in a divorce in Arizona.  Arizona law defines community property as most property acquired by either spouse beginning the day they marry and ending the day one spouse serves the other spouse with a petition for dissolution of marriage.  The significant exceptions are an inheritance to one spouse, a gift to one spouse, and pain and suffering damages from a personal injury claim.  Arizona law defines sole and separate property as property acquired prior to the date of marriage, after the date of service in a divorce, gifts to one spouse, one spouse’s inheritance, and pain and suffering damages.

This sounds like a simple distinction, but sometimes the issue becomes more complicated.  For example, if a spouse has money in a bank on the day of marriage, it is that spouse’s separate property.  What if that spouse puts that money into a community property bank account after marriage?  The law presumes co-mingled assets to be community property, but a spouse can trace the separate assets and, if that spouse can do so by clear and convincing evidence, the property will retain its sole and separate characterization.

Suppose a spouse owns a house prior to marriage, sells the house, and uses the proceeds to purchase a new house, taking title with the other spouse as community property.  That spouse has made a gift to the marital community unless the other spouse has agreed in writing to the contrary.  The law presumes property acquired during marriage to be community property.

Also, spouses can agree to change the characterization of property.  They can agree to make sole and separate property into community property and vice versa.

Other issues as to the characterization of property include the growth of separate property due to community labor, the payment of debt secured by sole and separate property with community funds, and the vesting of property earned during the life of the marital community that perhaps compensates for future (post-divorce) employment (such as stock options).

Also, sole and separate property is not necessarily simply separate property for the family court to confirm to the spouse that owns it.  It may influence several different issues.  For example, sole and separate property that produces income will have an effect on the calculation of child support and will have an effect on spousal maintenance.  It may also have an effect on the determination of an award of attorney’s fees to one spouse.

The characterization of sole and separate property and community property is an important issue in Arizona divorce and is not always as simple as it seems.  If you are facing a divorce and have significant property, you should consult an experienced family law attorney.

Published in Blog
Thursday, 24 July 2014 15:03

Arizona Community Property Basics

Arizona law divides a married couple’s property into two groups: community property and separate property.  Community property is the property that belongs to the husband’s and wife’s marital community.  Simply put, it belongs to both the husband and the wife.  Separate property is property that belongs to one spouse only.

Arizona law presumes all property acquired by either spouse or both spouses from the date of marriage until the date that one spouse serves the other spouse with a petition for divorce or legal separation to be community property (except for property that was a gift to one spouse only, an inheritance by one spouse only, and most of a personal injury settlement or award).  Upon divorce or legal separation, the court will equitably divide the community property.  Usually, "equitably" will mean substantially equally.  Under limited circumstances, when the normal equities of marriage have not occurred, the court may divide community property substantially unevenly.  One example is if the spouses separate and live apart for several years, one spouse becomes a teacher during the separation, and then the parties divorce.  In that case, the court may divide the teacher spouse’s retirement unevenly.  The example from the Arizona Supreme Court is when spouses marry, the next day they buy a house together with one spouse’s separate property (money he had prior to the marriage), and two weeks later they file for divorce.

Also, property can change its characterization over time from separate property to community property or vice versa.  Courts call this transmutation.  This can occur by gift, such as when the spouses decide to refinance one spouse’s separate property house and sign a new deed accepting the property as community property.  It can also occur by commingling, such as when one spouse deposits separate funds into a joint account and, over time, enough transactions occur to make it impossible to trace the separate funds. Community property can also become one spouse’s separate property, but this is much more difficult to prove and the spouse making this claim has the burden to prove it by a higher standard of proof than normal.  When determining whether property has transmuted, Arizona courts use the inception of title rule, which says that property retains its characterization as separate or community unless the spouses undertake some affirmative action that changes the characterization, such as signing a new deed or comingling as discussed above.

Characterizing property as community or separate may seem straight forward (and usually is straight forward), but there are some potential complexities.  One example is when the marital community expends funds or labor on improving or paying secured debt on one spouse’s separate property.  The marital community may have a lien for the increased value and, in the case of community payments on debt secured by separate property, for the community funds spent to pay the secured debt.  However, when a spouse spends his or her separate funds to improve community property, the law presumes the expenditure to be a gift to the marital community.  A spouse must prove an express agreement to the contrary to overcome this presumption and must do so by a higher standard of proof.

Another complexity is the theory of quasi community property.  When spouses marry in a non-community property state and move to Arizona, upon divorce Arizona courts will treat the spouses’ property acquired in the previous state of residence as community property if the property would have been community property had the spouses acquired it in Arizona.  The quasi community property rule also applies when a creditor is attempting to collect a debt of one spouse incurred in another state if the debt would be a community debt if the spouse incurred it in Arizona.  This means that if one spouse incurs a debt in a non-community property state and the couple then moves to Arizona, a creditor can collect against community property (such as either spouse’s employment income) if the debt would have been a community debt had they incurred the debt in Arizona.

This is just a basic overview of Arizona’s community property laws.  It may answer many questions, but is by no means comprehensive.  For example, this article does not address the characterization of employee stock options.  You should seek an experienced family law attorney’s advice when determining issues like community property.  Thomas A. Morton is an experienced family law attorney in Phoenix, Arizona who you may contact for a consultation on this subject.

Published in Blog
Saturday, 16 November 2013 20:16

What Happens to Real Estate in a Divorce?

What happens to jointly-held property, specifically real estate, when a married couple divorces in Arizona? It depends on what the divorce decree says, but first, let’s look at different ways couples hold joint property. They can hold property in joint tenancy, which means that each spouse holds an undivided one-half interest in the property and that, if one spouse dies, the other spouse owns the property: the deceased spouse cannot leave the property to someone else in a will. A married couple can also hold property as community property, which means that the marital community owns the property and if one spouse dies, the other spouse owns the property, like in a joint tenancy. Finally, a married couple can own the property as a tenants in common. The key difference between a tenancy in common and the previous two ways to hold property with a spouse is that when a spouse dies, that spouse’s portion of the property does not belong to the surviving spouse. The deceased spouse can leave the property to someone else in his or her will.

In Arizona, when a married couple divorces, the divorce decree determines what happens to the property. The decree will usually say who keeps the real estate property. A divorce decree can be recorded and is effective to transfer title. Therefore, if a decree assigns property to one spouse and the two former spouses never change the deed, the property still belongs to the spouse listed in the decree. Still, the former spouses should execute a deed in order to avoid a mess when one of them dies.

Now, the interesting question is what happens to jointly-held property that the divorce decree omits? In Arizona, property held in joint tenancy or as community property that the divorce decree omits becomes by operation of law (i.e., "automatically") property held by tenants in common. Therefore, if a couple owning property in joint tenancy or as community property gets a divorce and the decree omits the property, one former spouse does not own the other spouse’s half of the property if the other spouse dies. The deceased spouse’s portion of the property will pass according to the deceased spouse’s will or, if the deceased spouse has no will, to his or her heirs at law (surviving spouse; if no surviving spouse, to surviving children and/or grandchildren, great-grandchildren, etc.; if no children, etc., to surviving parents; etc.).

If you get a divorce, make sure the terms of your decree divide all real estate. The State of Arizona has seen some messy situations caused by the failure to divide real property in a divorce decree.



Published in Blog
Friday, 15 March 2013 17:21

Arizona Community Property

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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