Division of Marital Property & Assets in Arizona

The division of community property in Arizona is generally a two step process:

Community Property

First, what constitutes community property? Community property consists of property acquired by either spouse during the marriage. Community property does not include property acquired by gift or inheritance, or excluded by a valid prenuptial agreement.

Division of Community Property

Second, community property must be divided equitably. In determining the equitable division of property, the Court will look at all relevant factors including: (a) the contributions of each spouse; (b) the value of property set apart to each spouse; (c) the economic circumstances of each spouse; and (d) any increase, decrease or depletion in the value of any separate property during the marriage.

Not all Community Property is Created Equal

Complicating the process is the fact that all assets are not worth what they appear to be worth. Is it more beneficial to accept the residence worth $500,000.00 in exchange for the 401K worth $600,000.00? The answer depends on a variety of factors including, but not limited to:

  • Can you afford to maintain the family home?
  • If you sell the family home, will there be any capital gain taxes to pay? If so, what will they be?
  • If you sell the home, can you qualify for a mortgage on your own?
  • What if you try to sell the home and find out it needs a new roof and $30,000 in repairs?
  • If you take the 401K and need to the money to live on, will there be an early withdrawal penalty? Will you have to pay income tax on the amount withdrawn? If so, how much is the penalty and what is the tax bill? Many people fail to realize, until it is too late, that if they cash out their 401K, it might only be worth ½ of its market value after penalties and taxes are paid.

Personal Business Interests

If either you or your spouse owns a business, it can get even more complicated. When a business is involved, the parties may need to hire an expert to determine its value.

Determine what Each Asset is Worth based on your Circumstances

The division of marital property can be complex and it usually takes an experienced lawyer to help you obtain a fair result. Before agreeing to any type of property settlement, make sure you have considered all factors that determine the value of each asset.