Community Property and Debt
The Marital Community in Arizona
Community Property and Debt
While Arizona family law attorneys have spent decades studying and arguing about the finer points, the basic outline of Arizona community property law is written in Title 25, Chapter 2, Article 2. When a case is filed to legally end a marriage in Arizona, it is called a “dissolution,” and the metaphor of a chemical solution is fairly descriptive. In Arizona, community property works to create a “pool” of assets which is filled over the length of the marriage with the contributions of both parties. Metaphors aside, the central concept of community property is simple enough: any property that either spouse acquires during the marriage is owned jointly by both spouses unless certain exceptions apply. Community debts largely follow the same pattern: with certain limited exceptions, either spouse acting alone can, in general, incur a debt that both spouses are legally responsible for.
Common Exceptions
Some of the most common exceptions to the rule that property acquired during the marriage will be community property are gifts, inheritances, and workers’ compensation payments, which are considered the sole and separate property of the spouse who acquired them. Similarly, some debts can only be enforced against both spouses if both spouses agreed to them and signed for them, such as a guarantee for a third party’s loan or real estate transactions lasting longer than 12 months. The community gets the benefit of the doubt, however, so if it is unclear whether an asset or debt is community or separate, it will likely be considered to be community. Notably, the fact that an asset or debt is titled in only one spouse’s name, without more, will generally not be enough to prove that the asset or debt is separate.
Co-mingling
Separate assets, such as gifts, inheritances, and those that a party already had before getting married do not automatically become community property when a person gets married, but it is easy for those assets to become mixed (“comingled”) with community assets unless that party actively works to keep the assets separate. Once the separate property has been mixed with enough community property that it is difficult to separate one from the other, the law will treat all of it as being part of the community pool of assets.
Community Liens
Sometimes, assets from the community pool are used to benefit one spouse’s separate property and in these cases, while the separate property will remain separate, the community is typically entitled to be compensated for its contribution, which may include a proportional share of any appreciation (or depreciation) in the separate property. The “community contribution” can be funds from a community source but because a spouse’s work and its proceeds are also considered community property, a spouse who uses their time, skill, or effort to benefit separate property may also be making a community contribution that could entitle the community to compensation.
