Arizona Divorce: Dividing Property

Find out how marital property (and debt) is divided in an Arizona divorce case.

Is Arizona a Community Property State?

Yes, Arizona is one of the minority of states that follows community property rules. The majority of states adhere to equitable distribution principles, but Arizona is not one of them.

Arizona Divorce Rules and Property Division

A judge will divide a divorcing couple’s property and debts, unless the couple is able to reach a settlement agreement. Under Arizona’s community property laws, all assets and debts a couple acquires during marriage belong equally to both spouses. Unlike some community property states, Arizona does not require the division of marital property in divorce to be exactly equal, but it must be fair and will usually be approximately equal. See Ariz. Rev. Stat. § 25-318 (2020).

How property is characterized will affect how it’s divided in a divorce. Only community property is split between the spouses. Each spouse will retain his or her separate property following a divorce.

What Is Separate Property?

Separate property includes:

  • any property one spouse owned alone before the marriage
  • property acquired by gift or inheritance by either spouse before, during, or after the marriage
  • any property or asset that is covered by a valid prenuptial agreement or a postnuptial agreement.

If a spouse mixes (called “commingling”) his or her separate property with community property, the separate property usually loses its status as separate. For example, if a spouse who was the sole owner of the family home before the marriage changes the title to community property or uses marital funds to pay the mortgage, a court would consider this evidence that the owner intended to make a "gift" of the home to the marital community.

Many types of assets can be partially community and partially separate, including retirement accounts in which one spouse contributed to both before and after the marriage, or a business one spouse started before marriage and continued operating after marriage. See Ariz. Rev. Stat. § 25-203 (2020).

What Is Community or Marital Property?

There is a strong presumption under Arizona law that all assets and debts a couple accumulates during marriage are community or marital property. Distinguishing community property from separate property can become very complicated, especially if one spouse owns a business or other asset to which the other contributed labor or funds during the marriage. If you have a complex property situation, you may need to consult an attorney for advice. Spouses who can’t decide what belongs to whom will have to let a court determine whether commingled property was a gift to the marriage or whether the original owner should be reimbursed in whole or in part.

Arizona makes an exception to the 50/50 rules where each spouse takes half the assets and debts if one spouse has committed waste (reckless spending) of marital assets. For example if one spouse spent $100,000 of marital assets gambling, a judge may reduce the gambling spouse’s property award by $100,000.

Determining Property Value

The spouses—or the court if a couple can’t agree – generally assign a monetary value to each asset or debt. An approximate value for each piece of property helps a judge make a fair property award. Appraisals can help a couple or court determine the value of real property, antiques, or artwork. Retirement assets can be very difficult to evaluate and may require the assistance of an actuary, C.P.A., or other financial professional.

Selling Marital Property

When a spouse files for divorce, a judge usually puts a freeze order in place which prevents either spouse from selling or giving away marital assets. This means neither spouse can sell a marital asset during a divorce unless he or she has permission from the court. Most divorcing couples want to know who gets the marital home during a divorce.

In cases where the couple can no longer afford the family home, a judge may order the home to be sold even while the divorce is pending. Any proceeds from the house sale would be split between the spouses in accordance with Arizona community property rules.

Once a divorce is finalized, spouses are free to sell any property items awarded to them under the divorce decree. Couples who are able to settle their divorces without a trial usually have more leeway in deciding which marital items they want to sell and keep.

Arizona Settlement Agreements

Spouses are free to reach their own divorce settlement agreements in Arizona as long as the agreement is reasonably fair to both spouses. A couple can hire a mediator or reach an agreement on their own. A couple can divide assets in their settlement agreement by assigning certain items to each spouse, by allowing one spouse to "buy out" the other’s share of an asset, or by selling assets and dividing the proceeds.

Couples can also agree to continue to own property together even after the divorce. Although continuing to hold property together isn’t a very attractive option for most people, since it requires a continued relationship, some couples agree to keep a family home until children are out of school. Others may keep investment property, hoping that it will increase in value.

The couple must also assign all debt accrued during the marriage, including mortgages, car loans, and credit card debts, to one of the spouses. Couples dividing debts should be aware that their separation agreement or divorce order is not binding on creditors, who may continue trying to collect a community debt from either spouse.

If a debt is assigned to one spouse, the other can ask the court to put a lien on that spouse’s separate property as security for payment of the debt. Usually it’s a better practice to try to pay off all the marital debts before the divorce is finalized—if you're selling the family home or one spouse is buying the other out, there’s often a refinancing of the house loan that provides an opportunity to do this.

Resources

To learn more about how property is divided after a divorce, please see our section on Property & Divorce. For more information on issues surrounding divorce in Arizona, see Arizona Divorce and Family Laws.

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