Demystifying Community Property Division in Divorce: What You Need to Know

An Introduction to Community Property Division

Divorce can prove a remarkably traumatic and messy experience even when everything goes about as smoothly as you might realistically hope. The division of property that you and your spouse have shared for years, however, can seem especially tricky, often introducing fresh grievances or re-igniting old ones in the process. You may have additional problems dealing with Arizona’s adherence to the principle of community property division. Let’s examine this method of divvying up assets between divorcing spouses so you can gain a better understanding of how it works, what problems it might entail, and how to ensure the most satisfactory possible outcome.

Community Property vs. Equitable Distribution

Most U.S. states use a method known as equitable distribution to determine who gets what in a divorce case. In equitable distribution, the court has full power to distribute assets based on its interpretation of what’s fair to each party. Depending on such variables as which spouse earns the lion’s share of the household income, spends more time looking after the children, or both spouses’ potential earning power, the court may then award a spouse anywhere from one-third to two-thirds of the overall marital assets.

Nine states, including Arizona, currently break this trend by dividing marital assets according to community property rules. (In Alaska, however, community property is treated as an option, not a requirement.) This means that the marital assets are divided 50/50 regardless of the roles played by each spouse in the marriage. The court has far less power over the awarding of assets, although it does retain some say over what constitutes an equal split. Your share of the community property may include assets that you don’t especially want while depriving you of others that you genuinely prize.

Separate Property vs. Community Property: What Counts as Which?

Community property doesn’t place everything you and your spouse own into a single lump — instead, it applies specifically to items that you purchased during your marriage. Exceptions to this rule include property acquired separately as a gift or inheritance, as well as any property acquired following a petition for divorce that results in an actual divorce decree.

Certain assets are considered separate property, placing them outside the bounds of the divorce settlement. These include any real estate or other property you acquired before getting married, as well as any rent or other additional value generated by that property.

The First Step: Complete Disclosure and Initial Assessment

You and your spouse (with the aid of your respective attorneys) can iron out much of the confusion over your community property division before the matter ever goes before the court. First and foremost, both of you must disclose everything you own, from pets and jewelry to cash, cars, and homes. Attempting to shield any of your assets by excluding them from the community property inventory will only introduce costly, upsetting complications to your divorce. Once you and your spouse have listed every asset you can think of, you’ll need to figure an estimate of value to help the court decide what makes for an equitable division.

Business, Home, and Debt Division 

If you started your own business or purchased a business before your marriage, that business remains wholly yours as separate property. However, the court may decide to award your spouse a percentage of the business’s appreciation in value, or even an outright percentage of the business itself, if your spouse contributed to the business’s success either financially or through hard work.

A home purchased before marriage, with the deed in your name alone, remains your separate property, giving you the right to ask your spouse to vacate it. However, if you both hold joint title to the home and your spouse serves as your children’s primary caregiver, your spouse may actually be the one who continues to live on the property.

Community property includes debts as well as assets. Debts are typically considered the problem of both spouses equally, regardless of who incurred the debt or whether the debt was incurred before the marriage.

Don’t go it alone when pursuing a community property divorce. Contact our firm to speak to a skilled Arizona divorce attorney.