In a previous post, I addressed the process of identifying, categorizing and valuing assets prior to the assets’ being divided in an Arizona divorce case. This post will provide an example of how assets and debts could be divided in a hypothetical case.
Under A.R.S. §25-318, a judge in an Arizona divorce case is to divide assets equitably, “though not necessarily in kind . . . .” This phrase–“not necessarily in kind”–simply means that, while the overall division of assets and debts must be fair, or substantially equal, an Arizona judge is not required to equally divide each individual asset equally. Similarly, the judge is not required to liquidate all assets and divide the proceeds equally.
In the example I will use, the husband and wife have community property consisting of a house with $50,000 equity, a truck with $15,000 equity, a car with $20,000 equity, a boat worth $20,000, a 401(k) worth $100,000, and credit cards totaling $15,000. The table below illustrates one possible division of these assets and debts so that, at the “bottom line”, each party receives $95,000 net.
HUSBAND WIFE
Truck/Debt $15,000 House/Mortgage $50,000
Boat 20,000 Car/Debt 20,000
401(k) 65,000 401(k) 35,000
Credit Cards (5000) Credit Cards (10,000)
Total $95,000 Total $95,000
Note in this example that none of the assets needs to be liquidated. As long as the “bottom line” is equitable, or substantially equal, the division of the marital assets is valid under the law.
The example assumes, of course, that there is no premarital agreement dictating a division of assets other than that prescribed by Arizona community property law. Furthermore, although our example ignores tax consequences for simplicity’s sake, in the real world, the 401(k) dollars would need to be tax-effected before the division is calculated in order to achieve a truly “equitable” division of the assets.
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