Community Property and Equitable Distribution: What Are They?
It is no secret that divorce can be difficult. There are complexities even when it is amicable. Next to the question of “Who gets the children?”, the most difficult and complex arguments and agreements will be about property, assets, and money.
There are two different methods of dividing property in divorce proceedings: Community Property and Equitable Distribution. Community Property is everything the couple accumulated while they were married. This includes all real estate, businesses, bank accounts, personal property (stereo, car, boat, furniture, etc.) and even debt. In Community Property states, everything is split 50/50, no questions asked. Equitable Distribution, however, is when everything is split in accordance with how the judge sees fit. That does not mean everything will be split equally.
Arizona is one of nine states where all Community Property gets equally divided (along with Puerto Rico and Alaska, the only state with an “opt-in” stance on the Community Property Law).
What is the Process for Proper Distribution of Community Property in Arizona?
In the State of Arizona, Community Property accumulated in the marriage may be divided up, but not always divided 50/50. In Arizona, the Court will divide assets and debt as fairly as it sees fit to do so. As difficult as it is to separate a personal and financial union you have had with someone, your best bet is to independently divvy up the Community Property. It is best if both parties can calmly and maturely negotiate an agreement of division, rather than leave it up to the Court. If the Court is brought in to divide and negotiate the distribution of your Community Property, please prepare yourself for conflict with each other, and drawn-out legal proceedings.
The Court may not favorably give you what you deserve. Plus, neither party knows how the Court will divide everything. If, however, you and your spouse cannot come to a sensible agreement, the Court will have to be called in to divide everything. Anything acquired prior to the marriage like a business or stocks is considered Separate Property, unless funds from both parties have contributed to it, which would then make it Community Property.
How Do We Divide Our Community Property?
Start with pure disclosure of EVERYTHING the two of you own, even if it is property or a business that the other party is not aware of. Houses, cars, pets, land, businesses, 401K, bank accounts, stocks, etc. Even debt is considered Community Property in Arizona. Hiding assets is not smart in a divorce, especially when there are so many resources to find information on ownership of businesses and property. Doing so can result in a very long divorce proceeding with higher attorney fees, possible missed time from work, and more emotional distress.
Something as simple as a list with a pen and notepad will suffice at the beginning of this process. List everything the two of you can possibly think of and the value of it. A mature and fair conversation is a must-have between the two of you as to who gets what. Remember, this list must go before the Court and get approved by the Judge in order for it to be enforced and adhered to. If the Judge does not see the division to be fair to both parties, it will be rejected and the Court will intervene and investigate for further details to determine proper distribution. Couples may also consult a third party as a mediator for this if it so happens that neither party can come to a fair agreement.
Debt: How is It Handled in Divorce?
When debt is a matter in a divorce, the State will comb through all debts acquired before, during, and after marriage. In some states, a person’s debt that he or she created prior or after the marriage can still be considered Community Property and both parties will be responsible for said debt. Debt acquired before or after marriage can also become the responsibility of the person who acquired the debt or the person who is more able to pay off the debt.
It is very common for the Court to hold both parties responsible for debts, no matter who specifically incurred the debt. Most creditors can also seek repayment from both parties for any outstanding debts incurred during the marriage.
Business: Can I Obtain My Spouse’s Business?
A business your spouse started or purchased prior to the marriage is considered separate property. While you may not be entitled to the business, you may, however, be entitled to a percentage of the appreciation of your spouse’s business has accumulated within the duration of the marriage. The Court may even award a percentage of the business to the other party if he or she did any work for the business or financially contributed to it in any way during the marriage.
The House: What Happens in Community Property States (i.e., Arizona)?
If the house was owned by one party, and it is designated as separate property due to inheritance, prior-marriage purchase, or put the title in only his or her name, the person has the right to ask the other spouse to vacate the property. If the two parties have joint title to the home or the home is otherwise considered marital property, but one spouse provides primary care for couple’s children after the divorce, that spouse usually stays in the family home.
Spouses with no children and a joint title to their family home may decide who stays in the home however they wish, without the intervention of the Court. If the divorcing couple cannot come to an agreement on their own, the Court will make the decision for them accordingly.
Retaining a Divorce Attorney: Is Legal Representation Necessary?
One word: YES. While having an attorney is not mandatory, it is definitely necessary for making sure you get what you want, need and deserve from your very special union. A Family Law team can objectively navigate you through this very emotional time. You need a team that will look out for your best interests while noticing and researching other aspects of the case that you may be oblivious to because of the emotional strain of the entire ordeal. For starters, a strong divorce attorney (the leader of the legal team) knows the law! He or she knows what can and cannot be done while working in your favor. Your attorney will also be able to research websites, organizations, and facts that you may not be privy to. You retain an attorney for representation of your needs and entitlements, and for their access to resources, only Officers of the Court can obtain. Investing in a qualified, aggressive, and supportive legal team is the best investment you can make in a divorce to ensure you get what you deserve.
Divorce can be a very difficult life event that can drain a person emotionally, psychologically, and financially if not handled with the best of care, support, and experience.