Asset Division Basics

A primary issue in any Arizona divorce is the division of the parties’ assets.  The process of dividing assets in divorce consists of identifying the assets, categorizing the assets as separate or community property, valuing the assets, and dividing the community property assets substantially equally.

Identifying the Assets.  Before assets can be divided in a divorce, we must know what assets the parties have.  A lawyer’s best source of this information is typically his own client.  I have my clients provide me lists or inventories of all of their assets, including real estate, vehicles, businesses, retirement and investment accounts, and household goods.

Tax returns are also rich sources of information.  The dividends and interest reported on Schedule B to the Federal 1040 tax return form may lead to the discovery of previously-unknown bank or brokerage accounts.  Other schedules may reveal real estate holdings or business interests.

Another way to identify assets is a discovery or information request to the opposing party.   Discovery tools include written questions, called “interrogatories”,  requests for production of documents, and depositions.

Finally, a lawyer may subpoena information about assets from financial institutions and other third parties.

Categorizing the Assets.  Once we know what assets exist, we must categorize them as community property or sole and separate property.  Only community property is divisible in a divorce.  Community property includes, essentially, every asset acquired by either spouse’s industry during the marriage.  Sole and separate property includes assets either spouse brought into the marriage and assets gifted to or inherited by a spouse during the marriage.

The existence of a prenuptial agreement would also affect whether assets are community or separate.

Some assets may be mixed, such as a 401(k) one spouse brought into the marriage but to which that spouse continued contributing during the marriage.  The pre-marriage balance (and during-marriage growth thereon) is separate property.  The during-marriage contributions and growth thereon is community property.

Valuing the Community Assets.   The assets identified and categorized as community property must next be valued.  The values of bank and other financial accounts are determined by statements.

Vehicles are typically valued using the Kelly Blue Book.

Real estate and business interests may need to be appraised.  Unique assets such as jewelry, fine art, or collections may also need to be appraised by an industry specialist.

Dividing the Community Assets.  Finally, once the community assets are identified and valued, they must be divided between the spouses.   The division can by made by the judge following a court trial or can occur by way of a settlement agreement reached by the parties with or without a mediator.

Under Arizona law, community property is to be divided “equitably”, which has been interpreted by the courts to mean substantially equally.  In rare cases, however, a judge has the discretion to find that the equitable division is unequal.  This might be appropriate when one spouse uses separate property to purchase a jointly-titled home in the first few weeks of a marriage and when the marriage ends very shortly thereafter.  The judge may not feel it is fair–not equitable–to award the non-contributing spouse 50% of the jointly-titled home when the marriage never really took hold.

Additionally, “marital misconduct”, such as an extra-marital affair, is not to be considered by a judge in dividing marital assets.   Where one spouse has destroyed, concealed, or fraudulently disposed of assets, however, it may be possible for the “innocent” spouse to obtain an unequal division of the remaining marital assets to compensate her for the “guilty” spouse’s waste of marital assets.

Copyright © 2017 by Scoresby Family Law – J. Kyle Scoresby, P.C. All rights reserved.