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Arizona Community Property Laws – Who Gets What?

Arizona Community Property Laws – Who Gets What?

Defending the People of Arizona

With more than 100 Years of combined experience

Arizona Community Property Laws – Who Gets What?

When you go through a divorce in Arizona, you and your spouse will have to divide your property and debts. How your property will be divided will depend on when it was acquired and whether you have a prenuptial or postnuptial agreement in place.

The attorneys at the Schill Law Group can help you to understand the community property laws of Arizona and advise you about the potential tax consequences and other issues that might arise during the property division portion of your case.

How is Property Divided in Arizona Divorces?

While some states are equitable division states for divorce cases, Arizona is what is known as a community property state. Under A.R.S. § 25-211, all of the assets and property that are accumulated during your marriage are considered to be community property with the following exceptions

  • Property that one spouse inherits
  • Property that is given as a gift to only one spouse
  • Property that is obtained after a divorce or separation petition has been filed

[1] Community property is considered to be equally owned by both spouses. This means that the community or marital property will be divided equally between each spouse during the property division portion of the divorce.

How are Debts Handled in a Divorce?

Like the assets that you accumulate during your marriage, the debts that you and your spouse have accumulated are also considered to be community debts and subject to division in your divorce. Handling the division of debts in your divorce can raise some important issues.

If the judge orders that your spouse is responsible for repaying a debt that has both of your names on it, your credit score can be harmed if your spouse fails to pay it on time. This is because your creditors are not parties to your divorce case, and they are not required to follow the family court’s orders.

If you have joint debt with your spouse, you should try to either jointly pay them off before your divorce is finished. If that’s not possible, you should contact the companies to try to get your name removed.

If your spouse is allocated the responsibility for repaying a jointly held debt after your divorce but fails to fulfill his or her obligation, you will need to repay it yourself to avoid damage to your credit.

You can file a motion with the court to hold your spouse in contempt for failing to meet his or her obligations to seek reimbursement for the amount that you had to pay for the debt that was allocated to him or her.

What is Separate Property?

Under A.R.S. § 25-213, the separate property includes the property and liabilities that each spouse brought into the marriage. It also includes inheritances that are received by one spouse and gifts that are given to only one spouse during the marriage.

Separate property is not subject to division in a divorce and instead remains the sole property of the spouse who owns it. However, property that becomes commingled with the marital property during a marriage may lose its separate nature and be included in the marital estate.

For example, if one spouse inherits money, deposits it into a joint bank account, and uses some of the funds to pay for bills and other items during the marriage, it might be considered to be commingled with the marital estate and subject to division.

If a spouse who inherits money instead keeps it in a separate account and does not use it to pay for community debts, it should retain its separate nature and avoid being divided in a divorce.

What is the Effect of a Prenuptial or Postnuptial Agreement?

A prenuptial or postnuptial agreement is a legal agreement that both spouses enter into either before or after their marriage. Prenuptial agreements have become more popular. If your fiancé presents you with a proposed prenuptial agreement, you should consult with a family law attorney at the Schill Law Group before you agree to sign it.

A prenuptial agreement may be used to waive your rights to certain types of property in the property division of any future divorce. It can also be used to waive your right to seek spousal maintenance.

If a prenuptial agreement is in place, it could prevent you from getting some of the assets that would otherwise be considered to be marital property in your divorce. For example, if your spouse had a business before your marriage, you may not be able to get your portion of the increased value of the business in your divorce if you waived your rights to it in a prenuptial agreement.

A Phoenix divorce attorney at the Schill Law Group can review a prenuptial agreement to determine whether it is valid and how it might affect your rights. If the agreement was not entered into or drafted correctly, the court may disregard it and order the community property to be divided between you and your spouse as if it did not exist.

A prenuptial agreement can be challenged and might be set aside by the court for the following reasons:

  • You entered into it involuntarily.
  • Your spouse failed to disclose the extent of his or her assets.
  • The prenuptial agreement was unconscionable at the time that it was drafted.
  • The prenuptial agreement resulted from fraud, coercion, or duress.

Proving that a prenuptial agreement should be set aside will require some investigation and evidence. If it is set aside, you will then proceed with a normal property division in your divorce.

It is important to note that a prenuptial agreement will not be set aside simply because you made a bad deal or that your circumstances have changed since you signed it.

What Happens if a Spouse is Concealing or Hiding Assets?

In some divorces, one spouse will try to hide his or her assets, transfer them to others, or spoliate them simply to prevent the other spouse from getting his or her fair share. If you believe that your spouse is hiding assets to prevent you from receiving what you should, working with an experienced attorney is important.

A lawyer can work with forensic accountants and other experts to locate assets that your spouse has hidden. If it is impossible to locate everything, your attorney can present evidence to the court and ask for the judge to draw an adverse inference based on your spouse’s conduct.

Have an Aggressive Phoenix Divorce Attorney on Your Side.

Dividing your property and debts in a divorce can be complicated. If you have been married for years and have accumulated substantial assets, the process can be even more complex.

The attorneys at the Schill Law Group have handled hundreds of complex divorce cases and are experienced in handling all types of property division matters. Contact us today to schedule a consultation by calling us at 480.525.8900.


High Net Worth Divorce in Arizona

High Net Worth Divorce in Arizona

Defending the People of Arizona

With more than 100 Years of combined experience

High Net Worth Divorce in Arizona

When younger couples get divorced in Arizona, the process may be fairly straightforward because they may not have had much time to accumulate very many assets. However, if you have been married for a long time and have built substantial assets during your marriage, you may have to go through a type of dissolution called a high net worth divorce.

This type of divorce can be very complex because of the different types of assets that may be involved. High net worth divorces may involve complex asset classes and holdings worth hundreds of thousands up to millions of dollars. People who go through these types of divorces will likely need to get the help of a competent family law attorney who is experienced in handling high net worth divorce cases.

The Schill Law Group understands complex asset and debt division matters and is prepared to help.

How is a High Net Worth Divorce Different from a Regular Divorce?

A high net worth divorce will frequently involve complex legal and business issues that are not involved in regular divorces. High net worth couples may have vastly more extensive assets, including businesses, real estate holdings, art collections, trusts, stocks and bonds, investment accounts, retirement accounts, jewelry, and more. All of these types of assets may need to be identified, located, and valued to accomplish an appropriate division of property.

Under A.R.S. § 25-211, Arizona is a community property state.[1] This means that all of the assets that you have accumulated during your marriage that are not deemed separate property are considered to be equally owned by both spouses and subject to equal division. In many high net worth divorces, however, there may be antenuptial agreements in place.

High net worth divorces are likelier to include disputes about whether certain assets should be considered to be separate or community property.

How are Trusts Handled in High Net Worth Divorces?

Some wealthy couples have trusts established to hold substantial amounts of their assets. The handling of the assets of a trust can be crucial for the outcome of the property division in a high net worth divorce. When a spouse funds a trust with community property, it can transform the assets in the trust from being considered to be the separate property of that spouse to being considered to be the community property of both spouses to be divided in the divorce.

Normally, a trust that was created by a third party to benefit one spouse but not the other will be considered to be the beneficiary spouse’s separate property. The other spouse might argue that the court should consider the trust when it determines the amounts of spousal and child support that the other spouse should be granted.

When a trust is involved in a divorce, an attorney will need to seek disclosure from the trust. This can be hard because trust accounts may be located outside of the U.S. Trustees for U.S. trusts will normally send disclosures in response to a request. Offshore trusts might have trustees that fail to respond. When that happens, you might have to file a petition with that country’s court to seek an order for the trustee to provide disclosures.

How are Businesses Handled in Divorces?

Many high net worth divorce cases involve private businesses. When a private company is owned by one of the spouses, multiple complex issues will need to be addressed. The business will need to be properly valued. If the company has assets that are spread around the world, the valuation will be more complex. Often, business valuations will require significant investigations and the work of forensic accountants.

After a business valuation is completed, the divorcing couple will then need to determine how to distribute it in the property division portion of their divorce. One spouse may not be willing to give up his or her interest in the company. The spouse that wishes to keep control of the company might need to give a larger portion of the other assets to his or her spouse to retain control of the business.

How is Real Estate Handled in a High Net Worth Divorce?

While a regular divorce might involve dividing the marital home, high net worth divorces may involve real estate holdings beyond the home. Wealthy couples might have rental properties, commercial properties, and vacation homes. An appraisal of each of the various properties that are owned will need to be completed to understand what their fair market values are.

Some of the real estate properties might be the separate property that one spouse brought into the marriage. Other properties might be community property. Finally, some separate real estate might become community property if marital funds were used to make improvements. All of these issues will need to be addressed to ensure a fair division of the property.

Types of Complex Valuations in a Divorce

There are multiple types of complex valuations that might be necessary for a high net worth divorce. Some of the types of valuations that might need to be completed include the following:

  • Retirement accounts
  • Investment accounts
  • Stocks and bonds
  • Jewelry
  • Art collections
  • Intellectual property
  • Real estate
  • Businesses
  • Yachts
  • Other valuable assets

Different experts might have to value the assets from within their fields and submit written appraisals. In some cases, each spouse will hire his or her experts to testify about how they arrived at their valuations.

Spousal Maintenance in High Net Worth Divorces

Under A.R.S. § 25-530, spousal maintenance is a type of support that may be ordered by the court in cases in which the divorcing spouses have a large income disparity. Spousal maintenance is in addition to any child support that might be ordered, and it is frequently at issue in high net worth divorces. However, some cases involve prenuptial agreements through which the lower-earning spouse may have waived his or her rights to spousal maintenance.

In those types of cases, the lower-earning spouses might challenge the prenuptial agreements’ validity and claim that he or she signed under duress. A lower-earning spouse might also claim that the wealthy spouse failed to disclose all of his or her assets, meaning that the lower-earning spouse could not understand the rights that he or she was waiving.

Managing tax implications involved with asset division

Many tax implications might be involved in high net worth divorces. Both spouses will need to consider credits and deductions that might be lost after divorcing. Spouses who will have to pay spousal maintenance are not able to deduct the payments on their taxes any longer, and spouses who receive spousal maintenance are required to report the payments as income on their tax returns.

Transferring certain assets in divorces can trigger tax consequences. Some of the illiquid assets that might involve tax issues include the following:

  • Brokerage account funds
  • 403(b) accounts
  • 401(k) accounts
  • IRAs
  • Stock options
  • Annuities
  • Thrift savings plans

To prevent tax consequences when transferring some of these illiquid assets, a qualified domestic relations order may need to be prepared. This might help people to avoid penalties and taxes on what is transferred.

Concealment of Assets During a Divorce

Unfortunately, some spouses try to conceal or hide assets to prevent their spouses from getting their rightful share in divorces. They might try to transfer assets to family members or friends, hide them, or spoliate the assets. Others simply do not disclose all of their assets. For example, they might have accounts that are not disclosed and transfer funds from disclosed accounts to make it appear as if they have less. They might also move assets to offshore locations or place community assets in trusts.

Whenever a spouse believes that the other spouse is concealing or hiding assets, he or she will need to get help from an experienced attorney. A lawyer might work with a forensic accountant to find assets that have been spoliated, hidden, or concealed. If it is not possible to determine the extent of the person’s actions, the court can draw an adverse inference against the spouse who has engaged in this type of behavior.

Schill Law Group Experienced High Net Worth Attorneys

If you have accumulated substantial assets during your marriage and want to get divorced, getting help from an experienced high net worth divorce lawyer at The Schill Law Group is important. Our experienced property division and divorce lawyers understand how to handle the complex issues that are frequently involved in these types of divorces.

Contact us today to schedule a consultation by calling us at 480.525.8900.