February 1, 2013

Arizona Divorce Lawyer Discusses Basic Rules and Various Exceptions When Dividing Assets and Debts

Submitted by Attorney Douglas C. Gardner

Having been involved in hundreds, if not thousands of divorce cases, what was once very confusing now seems to make sense, until I try to explain it to younger attorneys or my clients.  Then, I remember and realize just how confusing the law in Arizona can be with regard to community property and community debt issues.  Clearly, it is to your benefit to find and hire an experienced and knowledgeable attorney.

For example, the general rule is that property acquired during the marriage is presumed to be community property and not the sole and separate property of either spouse.  However, there is another general rule with real estate. The way real estate is titled is presumed to be the intent of the parties.  In cases where the real estate was purchased during the marriage, but titled in the name of only one spouse, the other spouse may not have any ownership interest in the property, but can in many cases raise an “equitable” claim that a part of the increase in value of the property during the marriage should be shared between the parties.

Another scenario that often arises pertains to inheritance or gifts from family members.   While the general statutory rule is that property acquired during the marriage is community property, the statute specifically excepts from this rule gifts or inheritances, which remain the sole and separate property of the spouse receiving the gift or inheritance.  However, the further exception is that once a gift or inheritance has been commingled (for example placed into the same account as the paychecks of the parties), then it is presumed to be a gift to the community.  There are, however, certain cases when if a party can prove by “tracing” the funds that the inheritance was not spent, that it can retain its separate property, though some judges have stated that this is like trying to unscramble eggs.

Debts bring up similar issues.  Debts that existed prior to the marriage remain the sole and separate property of that spouse.  However, when the couple continues to use a credit card that predates the marriage, and much of the debt on the credit card account is from prior to the marriage and the rest from after the marriage, these same questions as to commingling can arise, and the question is whether the payments made during the marriage were intended to pay the oldest debts (those pre-dating the marriage) or the more recent debts incurred during the marriage.

Retirement accounts similarly raise questions.  In cases where a retirement account (pension, 401(k), or other retirement accounts) were started at the time of employment prior to the marriage, but then during the marriage money continued to be contributed to the account or pension benefits continued to vest, both spouses are entitled to an equal share of those benefits which can be shown were from during the marriage.  This is generally done formulaically as a percentage of the time during which the parties were married compared to the total time during which contributions were made or vesting occurred.

If you are involved in a divorce, legal separation, or annulment case involving various assets and debts, or if you have determined that you need experienced legal representation, please call 800-899-2730 and ask to speak with Douglas C. Gardner, or visit our website at www.yourarizonadivorcelawyer.com.