At Provident Law®, we understand that dividing property during a divorce can be one of the most challenging and emotionally charged aspects of ending a marriage. Arizona’s community property laws aim to ensure fairness, but navigating what qualifies as community versus separate property—and how to value and divide it—requires careful legal guidance. Whether you’re dealing with real estate, retirement accounts, a family business, or shared debts, our experienced Scottsdale family law attorneys are here to protect your interests and help you reach a resolution that supports your financial future.
A major component of divorce in Arizona is the division of property. Parties may own substantial property after many years of marriage, and during a divorce, they must divide assets such as real estate, bank accounts, vehicles, retirement accounts, and even the family business, in some cases.
Arizona’s Community Property Law
Arizona is one of only a handful of states with community property laws. In these states, everything that either spouse acquired during the marriage is presumed to belong equally to both spouses. This property is community property even if only one spouse’s name is on the title or only one spouse contributed funds to the account. Community property laws are based on the theory that spouses are partners who should leave the marriage with equal amounts of property.
However, not all property is subject to division in a community property state like Arizona. Property that one spouse owned before the marriage, inheritances, and gifts that only one spouse receives are separate property, not community property. In most cases, spouses retain any separate property unless it is mixed with marital property. For instance, if a wife inherits money from her grandmother, it generally will remain her separate property if the parties later divorce. However, if she deposited the inherited funds into a joint account that held other marital funds contributed by one or both parties, those funds might become community property.
Additionally, a prenuptial or postnuptial agreement can change how property is divided in a divorce. Suppose an asset is specifically reserved as separate property in that type of agreement. In that case, the court generally will uphold that agreement, regardless of whether it is an equitable division of property.
Dividing Community Property
Divorcing parties should understand the distinction between an equal division of property and an equitable division of property. Arizona law requires that community property be divided equitably between the spouses. Equitable often means close to equal, but not exactly equal, depending on the circumstances.
For example, an unequal division might be equitable in some cases because one spouse spent all the money in a bank account to go on vacation after the spouses separated. Fraud by one spouse might be another reason to divide the community property unequally.
The property division process begins with both spouses providing an inventory of all property they own and their debts. Full disclosure is required; any attempts to hide assets may result in sanctions by the court.
Once disclosure occurs, all property is classified as “community property” or “separate property.” Any disputes about the classification of property, such as mixed community and separate assets, necessarily involve documentation of the property to help the court make this determination.
After classification, spouses must assign a value to all community property. In some cases, spouses can agree on a fair market value for an asset. On the other hand, if the couple owns a complex asset, such as a family business, a professional may need to appraise its value for divorce purposes.
Once the parties have classified and assigned values to their property, they begin negotiating to divide their community property. If they cannot agree, then a court hearing may be necessary for the judge to decide how to divide up the property.
Spouses can divide property in various ways. For instance, in the case of the marital home, the spouses could sell the home and split the proceeds after all necessary fees and expenses are paid, as well as any mortgage loans on the home. On the other hand, one spouse could keep the home. In that case, the spouse keeping the home could refinance an existing mortgage (or take out a new one) to pay a portion of the home’s equity to the other spouse. Alternatively, the spouse who is not keeping the home could take a larger share of other assets rather than equity in the home to balance the property division.
Finally, the division of property also requires the division of debts that accrued during the marriage. All debts are divided in the divorce, no matter which spouse’s name is on the debt. In most cases, the debts are divided equally between the spouses.