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Arizona is a community property state. This generally means that property acquired prior to the marriage stays with the party who acquired it. Property acquired during the marriage is to be divided equally upon a divorce. The courts in the State of Arizona will distribute the community property of the spouses as it deems equitable and just, without regard to marital fault, after setting aside to each spouse that spouse's separate property. (Arizona Revised Statute 25-318).
The first dispute in contested divorces generally deals with which marital assets are community property. Usually, all earnings acquired during marriage and everything obtained with those earnings are community property. All debts incurred during marriage, unless the creditor was specifically looking to the separate property of one spouse for payment, are community property debts.
Generally separate property will be: gifts and inheritances given just to that spouse; personal injury awards received by that spouse; proceeds of a pension that vested before marriage; properties purchased with the separate funds of a spouse remain that spouse's separate property; and/or a business owned by one spouse before the marriage remains his or her separate property during the marriage, although a portion of it may be considered community property if the business increased in value during the marriage or both spouses worked at it.
Conflict may arise when separate property is mixed together with community property. Sometimes, one spouse may be able to identify which portion of the property is separate. One example of this is when a house is owned before marriage and continuing mortgage payments are made throughout the marriage. Otherwise if the separate property becomes mixed with the community property, and the two cannot be distinguished, the entire thing becomes community property.
The primary residential property owned by the divorcing couple is often the marriage's largest asset. Dealing with its division can be complicated, particularly when there are children involved. Courts often favor allowing the custodial parent to retain the home. Doing so may require complicated arrangements to ensure that the spouse who leaves receives adequate compensation for the home's value as well as provisions for ongoing mortgage payments, tax liabilities and upkeep of the home. When these issues cannot be resolved, the couple may be forced to sell the home and split the proceeds.
Pensions are often the second largest marital asset. When there are other income sources sufficient to compensate the non-pension holder, courts may leave vested pension rights in the spouse who earned it. Otherwise, under a federal law that makes division of pensions easier, a court in a divorce case may enter a Qualified Domestic Relations Order (QDRO) requiring the administrator of the pension to make payment to both the worker and the former spouse.
When couples work together in a family owned business, division of the business presents complex allocation and valuation problems. First, the couple or the court must decide who gets the business. Then, there must be a determination of its worth, which can require costly evaluation by outside experts. As with family homes, if there are not enough marital assets to adequately compensate the non-retaining spouse, there may be the necessity of a forced sale or long-term buy-out.