Sole and Separate Property- How a Legal Paraprofessional Can Help

When a couple decides to part ways, one of the biggest challenges they face is dividing their assets. Arizona’s community property laws dictate that most property and debts acquired during the marriage are shared equally.

However, separate property — assets owned before the marriage, gifts, and inheritances — typically remains with the individual who owns it.

The process of distinguishing separate property from marital assets requires careful consideration and clear evidence. It involves understanding legal nuances and often, meticulous documentation to prove the ownership and nature of the assets. This process can be complex, especially when separate property has been mixed, or commingled, with marital assets.

Whether you are just starting to consider divorce or are already in the midst of one, knowing how separate property is established in Arizona is a key step in ensuring a fair and equitable division of assets.

We will cover the following topics:

• What are Community Property Laws? 
• How Does Property Division Work in an Arizona Divorce 
• What are Considered Marital Assets
• What is Commingling of Assets
• Impact of Prenuptial and Postnuptial Agreements
• How Does Debt Distribution Work in a Divorce 
• What is Considered a Gift in Community Property Laws
• What Happens to My Inheritance in a Divorce 
• How a Family Law Legal Paraprofessional Can Help

What are Community Property Laws? 

Arizona is a community property state, as defined under Arizona Revised Statutes § 25-211.

This means that any property acquired by either spouse during the marriage is presumed to be community property and, therefore, jointly owned by both spouses.

There are exceptions to this rule, including property acquired by gift, devise, or descent, and property acquired after service of a petition for dissolution of marriage, legal separation, or annulment if the petition results in a decree. 

How Does Property Division Work in an Arizona Divorce 

Property division in an Arizona divorce follows the principles of community property law, guided by Arizona Revised Statutes § 25-318.

The law seeks an equitable, though not necessarily equal, division of both assets and debts accumulated during the marriage.

To illustrate how property division typically works in Arizona, here are some examples:

• Example 1: Division of Real Estate: If a couple owns a home purchased during their marriage, it is considered community property. In a divorce, the court may order the home to be sold and proceeds divided between the spouses, or one spouse may be allowed to keep the home, compensating the other with assets of equal value.

   

• Example 2: Retirement Accounts: Contributions to retirement accounts made during the marriage are deemed community property. During a divorce, each spouse is typically entitled to a portion of the retirement account that accrued during the marriage, which might require a court order known as a Qualified Domestic Relations Order (QDRO) to divide.
• Example 3: Business Ownership: If one spouse started a business during the marriage, the business is generally considered a marital asset. The value of the business must be assessed, and the non-owning spouse may be entitled to a portion of its worth.
• Example 4: Division of Debts: Just like assets, debts incurred during the marriage are divided equitably. This includes mortgages, car loans, and credit card debts, which are apportioned based on each spouse’s financial situation and other relevant factors.
• Example 5: Personal Property: Items such as furniture, electronics, and art, purchased during the marriage, are divided. The couple may agree on the distribution, or the court may decide based on fairness and practicality.

In these examples, the overarching principle is equitable distribution. The court considers various factors, including the length of the marriage, the economic circumstances of each spouse, contributions to the marital estate, and any destruction, concealment, or fraudulent disposition of community property.

It’s important to work with a family law legal professional to advocate for a fair division of property in accordance with Arizona law.

What are Considered Marital Assets 

Marital assets, also known as community property, refer to the property acquired by either spouse during the marriage. The Arizona Revised Statutes § 25-211 provides a framework for distinguishing these assets.

The following is a list of common types of marital assets:

• Income Earned by Either Spouse: This includes wages, salaries, bonuses, and other forms of compensation received during the marriage.
• Real Estate: Properties purchased during the marriage, regardless of whose name is on the title.
• Retirement Accounts: Contributions to retirement accounts, like 401(k)s and IRAs, made during the marriage.
• Vehicles: Cars, trucks, and other vehicles acquired during the marriage.
• Bank Accounts and Cash: Savings and checking accounts opened or funded during the marriage.
• Investments: Stocks, bonds, mutual funds, and other investment assets acquired with marital funds.
• Furniture and Home Furnishings: Items purchased for the marital home during the marriage.
• Debts: Loans and credit card debts incurred during the marriage are also considered part of marital assets.

It’s important to note that the distinction between marital and separate assets can be complex, especially in cases where assets have been commingled or used for the benefit of the marriage.

A family law legal professional can provide valuable assistance in identifying and classifying these assets to ensure a fair and equitable distribution in the event of a divorce.

What is Commingling of Assets

Commingling of assets occurs when separate property is mixed with community property, making it challenging to distinguish the original source.

In Arizona, once assets are commingled, they are often presumed to be community property unless there is clear and convincing evidence to establish the separate property character, as per the relevant case law.

Impact of Prenuptial and Postnuptial Agreements 

Prenuptial and postnuptial agreements agreements allow couples to delineate which properties are considered separate and community property, potentially overriding the standard community property rules.

How Does Debt Distribution Work in a Divorce 

In Arizona, similar to asset division, debts incurred during the marriage are typically considered community debts and are divided equitably upon divorce.

This includes credit card debts, mortgages, and car loans.

Depending on their financial situation and other relevant factors, each party may be responsible for a portion of the debt.

What is Considered a Gift in Community Property Laws

When dealing with community property laws in Arizona, especially during a divorce, it’s important to know how gifts are treated.

Generally, most things you get during your marriage are considered joint property and will be divided if you divorce.

However, gifts given specifically to one spouse are usually an exception. Here’s a look at what counts as a gift:

• Gifts Given Just to One Spouse: If someone gives something only to you or your spouse (like a birthday present), it’s usually seen as separate property. This could be a gift from a friend, family member, or anyone else.
• Clear Evidence of a Gift: It’s important to have some proof or clear indication that the item was meant as a gift for just one spouse. This could be a note, a card, or any other kind of evidence that shows it was meant to be a gift.
• Keeping Gifts Separate: To make sure a gift stays as separate property, don’t mix it up with things you own together. For instance, if you get money as a gift, don’t put it in a joint bank account that you both use.
• Gifts Between Spouses: Sometimes, the rules are a bit different for gifts between spouses. If one spouse gives the other something significant, it might still be seen as joint property unless there’s a clear agreement or proof that says it’s a gift.

It’s important to understand these points about gifts in community property laws because they can make a difference in how things are divided in a divorce. Keeping good records and being careful about how you handle gifts can help ensure they stay as separate property.

What Happens to My Inheritance in a Divorce 

Generally, in Arizona, an inheritance received by one spouse is considered separate property and is not subject to division in a divorce, as stated in Arizona Revised Statutes § 25-213.

However, if the inheritance is commingled with community property or used for the benefit of both spouses, it may lose its separate property status.