What exactly is community property?

There is a common misconception regarding the term or meaning of “community property”.   It is not uncommon for someone to mistakenly believe that once they are married everything transforms to an equal ownership.  You can get married and still have separate property.

Separate property is governed by A.R.S. § 25-213, which at the time of this article states:

  1. A spouse’s real and personal property that is owned by that spouse before marriage and that is acquired by that spouse during the marriage by gift, devise or descent, and the increase, rents, issues and profits of that property, is the separate property of that spouse.
  2. Property that is acquired by a spouse after service of a petition for dissolution of marriage, legal separation or annulment is also the separate property of that spouse if the petition results in a decree of dissolution of marriage, legal separation or annulment.
  3. Notwithstanding subsection B of this section and section 25-214, subsection C, a mortgage or deed of trust executed by a spouse who acquires the real property encumbered by that mortgage or deed of trust after service of a petition for dissolution of marriage, legal separation or annulment shall be enforceable against the real property if the petition does not result in a decree of dissolution of marriage, legal separation or annulment.
  4. A contribution to an irrevocable trust that has or will have as its principal asset life insurance on the person making the contribution is a contribution of the insured’s separate property if the spouse of the insured is the primary beneficiary of the trust.

Paragraph A states that any property that you bring into a marriage is that spouse’s sole and separate property including any profits, such as in rental property.  This is not always as clear cut as it appears, for example, a business that has an increase in value could be subject to a community property interest depending on the nature of the increase.  The law includes case law which further defines and analyses the statute.

Paragraph B states that once the Respondent is served (properly pursuant to the Rules of Family Law Procedure) the community terminates.  In other words, property acquired by either party is presumed to be the sole and separate property of the party that has acquired the property.  Again, not always a simple as it sounds.  There could be an argument regarding the character of the funds used to obtain the property.  For example, if the property or item was purchased with community funds then the other party will certainly argue that the property purchased is in fact community.

There are ways to preserve your separate property without a Pre-Nuptial Agreement, however, a pre-nuptial agreement is generally the best tool to use for this purpose.  There are many ways but they are not always blatantly obvious.  It is worth buying an hour or two of time from a licensed Arizona Family Law Attorney to explore your options before you are married, even if marriage is not in the foreseeable future.  Remember an ounce of prevention is worth a pound of cure!

For more information please call Enholm Law at 602-889-6273 to schedule an initial free consultation.