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114 Cards in this Set
- Front
- Back
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Community Property
Theory of Double Ownership |
Nature of community ownership created by the marriage. Each spouse owns an undivided and indivisible half. The interest of each spouse is present and vested, but remains undivided until the community is dissolved--either by death or dissolution.
This is known as double-ownership |
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Formation of the Community
Valid Community |
No "community" without a valid marriage.
Statutes require: 1) license 2) ceremony 3) by person authorized to perform and solemnize a marriage, OR by a person purporting to have this authority, AND believed in good-faith to have this power by at least one of the parties. 4) Marriage solemnized prior to license expiration. Where one party to the marriage has not been validly divorced, the marriage is invalid, and there's a serious question as to whether either party to the subsequent marriage can assert CP rights. |
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Formation of the Community
Marriage valid where contracted is valid in AZ |
Although AZ does not recognize common law marriage, marriages valid where they're contracted are given full faith and credit in AZ, as long as the marriage is NOT VOID and PROHIBITED in AZ.
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Formation of the Community
Meretricious Relationship |
Is a man and woman live together without marriage, there are no CP rights, although there may be rights based on implied or express agreement to share property, if there is consideration other than sex.
-Domestic services performed by one cohabitant may constitute consideration for an agreement to share ownership of property acquired by the labors of the other co-habitant, and TC should not inquire into the sufficiency of such consideration. Existence of a meretricious relationship does not per se bar recovery based on other principles of law, such as purchase money resulting trust for contributions to property in the name of one of the persons. |
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Formation of the Community
Effect of Living Apart |
General Rule: No effect
Limited Exception: Where the separation lasts for a long period of time, exceptional circumstances may lead to the conclusion tha tthe community has ceased to exist for property purposes. E.g. One spouse may be deemed by conduct (e.g. desertion and adultery) to have repudiated the community and losing, therefore, all rights to the subsequently acquired property of the other spouse. Legal Separation: Unless the parties agree otherwise, the CP rights are terminated when the couple obtains a court decree of legal separation |
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Agreements Affecting CP
Generally |
-Married couple can freely determine status of property, and can execute agreement settling the division of CP.
-Ct will give effect to an agreement that one spouse would have no interest in property acquired by the other spouse after the execution of the agreement. -After an agreement is executed, a subsequent creditor who KNOWS of the agreement, can only pursue the separate property of the debtor spouse. |
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Agreements Affecting CP
Pre-Marital Agreements |
AZ follows the Uniform Premarital Agreement Act. Agreements pursuant to the UPAA are made in contemplation of marriage and become effective on marriage.
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Agreements Affecting CP
Pre-Marital Agreements: Enforcement |
Must be in writing and signed by both parties.
1) Executed voluntarily 2) Must not be unconscionable and person against whom enforcement is sought must have had fair and reasonable disclosure of the opposing party's property or financial obligations OR waived right to disclosure OR could not reasonably have had knowledge of the party's property and financial obligations. |
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Agreements Affecting CP
Pre-Marital Agreements: Void Marriages |
Void marriage: Premarital agreement is enforceable only to the extent necessary to avoid inequitable results.
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Agreements Affecting CP
Pre-Marital Agreements: Scope |
Ks may cover almost any disposition of property that's not illegal or against public policy. However, a child's right to support may not be waived through a pre-nup.
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Agreements Affecting CP
Pre-Marital Agreements: Amendment or Revocation |
Must be in writing and signed by both parties. Enforceable without consideration.
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Classification of Property: SP or CP
Reasons for Classification: Management During Lifetime |
Owner of SP has complete power to deal with that property (sell, give, encumber, etc) during the marriage. For certain transactions involving CP, both spouses must be involved and take part in the transaction (e.g. acquisition, sale, or encumbrance of real property) for other transactions, either spouse has power to act in the interests of the community.
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Classification of Property: SP or CP
Reasons for Classification: Claims of Creditors |
Creditor's claim may be collectible only out of the SP of one spouse, or out of CP.
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Classification of Property: SP or CP
Reasons for Classification: Dissolution of Marriage |
Ct can equitably divide CP, property held by H & W in joint tenancy, or tenancy in common and certain SP (called quasi-CP) that is treated as CP in divorce only. All other SP must be awarded to owner spouse.
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Classification of Property: SP or CP
Reasons for Classification: Transfer at Death and Intestate Succession |
Each spouse can dispose of his half of CP and his SP by will. Thus, if record title to certain land is in the name of H only, he may devise all of it if he owns it as CP, but if it is CP, he has the power of testamentary disposition over only one half.
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Classification of Property: SP or CP
Reasons for Classification: Intestate Succession |
When a spouse dies intestate and is survived by a child who is not also the child of the surviving spouse, the AZ law of intestate succession grants the surviving spouse one half of the decedent's SP and no interest in decedent's share of the CP.
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Classification of Property: SP or CP
Separate Property |
"All property, real and personal, of each spouse, owned by each spouse before marriage, and that acquired afterward by gift, devise or descent, and also the increase, rents, issue, profits thereof that is the separate property of such spouse.
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Classification of Property: SP or CP
Separate Property: Property Acquired Prior to Marriage |
Property acquired prior to marriage is separate property:
e.g. W buys stock out of her earnings from 1995-2000. In 2000, she marries H. Stock purchased before marriage is W's separate property. |
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Classification of Property: SP or CP
Separate Property: Property Acquired By Gift, Devise or Inheritance |
Property acquired by gift, devise or inheritance is SP.
H and W are married. H inherits real property, stocks and cash from his mother. He deposits the case in a savings account in his name. The realty, stocks and savings account are H's separate property. |
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Classification of Property: SP or CP
Separate Property: Income and Gains from SP |
Income and gains from SP are also SP.
After H inherited the real property, stocks and cash, the rent from the realty, the dividends from the stocks and the interest from the savings account are also H's SP. |
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Classification of Property: SP or CP
Separate Property: Property that Spouses Agree Shall be Separate |
Property that spouses agree shall be separate is SP. Also, property that one spouse gives to the other intending it to be SP is SP.
EX: H buys real property and has the deed made out to W as grantee, reciting that it is her SP. H executes and records a disclaimer deed (a variation of a quitclaim deed, disclaiming any CP in the realty. |
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Classification of Property: SP or CP
Separate Property: Property Acquired After Service of Petition for Dissolution |
SP if the petition results in a decree for dissolution, separation or annulment.
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Classification of Property: SP or CP
Community Property: |
"All property acquired by either husband or wife during the marriage, except that which is acquired by gift, devise, or descent is the community property of the husband and wife."
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Classification of Property: SP or CP
Community Property: Property Acquired During Marriage |
All property acquired during marriage is classified as CP except property classified as SP and property traceable to SP.
-H married W in 1965. His salary as an engineer is all CP, and all property saved or purchased out of it would be CP. In 1975 W published a book--her royalties would be CP. Accounts receivable from H's profession have also been categorized as CP. |
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Classification of Property: SP or CP
Community Property: SP can be commuted into CP |
Agreement, gift or commingling.
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Classification of Property: SP or CP
Community Property: Gifts to the "Community" |
Gifts to the community--those intended to be CP are CP.
E.G H sells some of the stock he inherited, and with the proceeds, he buys stock in the name of H and W. He tells W it is to be part of their CP, and he files a gift tax showing transfer of a half interest to W. EX: H & W buys a house out of community savings, and take title as CP. H's mother learns they have a $10K mortgage and as a Christmas gift to them, she pays off the mortgage. |
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Classification of Property: SP or CP
Community Property: Tort Clams of Spouses: Recovery divided between SP and CP |
In a tort action for injuries to one spouse, part of the recovery is CP and part is SP: compensation for lost wages and medical expenses during the marriage is CP. Damages for pain and suffering, compensation for future impaired earning capacity is SP.
NOTE: Both H & W would be joined as plaintiffs in personal injury suits because of the partial CP interest. |
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Classification of Property: SP or CP
Community Property: Tort Clams of Spouses: Disability Pensions and Workers Comp Correspond to Tort Rules |
The rule for apportioning CP/SP in tort applies to disability benefits. Disability retirement pay must be apportioned between ordinary retirement benefits and disability. Worker's Comp benefits: Those payable after dissolution are the SP of the injured spouse.
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Classification of Property: SP or CP
Community Property: Tort Clams of Spouses: Effect of Jurek on Interspousal Immunity and Imputing of Negligence |
Interspousal immunity has been abandoned--at least in MVA cases. One spouse may sue the other, although the measure of damages is uncertain. SP damages may be recovered, and possibly 1/2 of CP damages will be allotted as SP. Moreover, the negligence of one spouse will not be imputed to the other to bar recovery by the latter, at least for that spouse's SP damages.
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Classification of Property: SP or CP
Proof Problems: Property Acquired During Marriage: Presumed CP |
Strong presumption that all property acquired during marriage is CP. Spouse claiming particular property as SP must prove its separate nature by CLEAR and CONVINCING evidence.
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Classification of Property: SP or CP
Proof Problems: Property Acquired During Marriage: Tracing: SP may change form |
Property may change form and still remain separate.
W bought stock prior to marriage, after marriage, she sells the stock, and buys land in her name with the proceeds. Land is her S--traced to the stock, and takes the character of the source. |
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Classification of Property: SP or CP
Proof Problems: Character of Property Not Determined by Record Title |
CP or SP character of property is not determined by the record title. Presumption applies even though title is in the name of only one spouse.
H saved $10K out of salary earned during marriage. He invests this in AT&T stocks, in his name alone. Stock is CP. Later he sells the stock and buys real estate in his name alone. Realty is CP. |
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Classification of Property: SP or CP
Proof Problems: Commingling: Property Presumed to be CP |
Separate funds commingled with the community funds may lose their identity as SP because when commingling does occur, property is presumed to be CP. This doctrine is really no more than the application of the strong burden of proof on the spouse claiming SP. Thus, transmutation of SP to CP occurs only when the identity of property as separate or community is lost. As long as the SP can be identified, commingling has no effect.
Eg. H & W have a joint savings account in which community funds are deposited regularly. W inherits $5K and deposits in the joint account. No withdrawals are made by W. W could still claim $5K out of the account as her SP. EX: On the same facts, if numerous deposits and withdrawals had been made by both H & W over the years, presumably the balance in the account would be CP. |
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Classification of Property: SP or CP
Mixed Property: SP Partially paid for or improved with CP or labor |
Property initially acquired before marriage or inherited,is SP even though payments on the purchase price or an encumbrance (mortgage or deed of trust) are made during the marriage out of CP. Similarly, CP expenditure of money or labor for improvements to that property do not change title from SP. For this purpose, AZ follows the "inception of title" theory, characterizing property as CP or SP according to its character at inception. However, use of CP for debt retirement or improvement of SP will normally result in community "equity" in the enhanced value of the property attributable to the CP. The nonowning spouse is thus entitled to share in appreciation value, not just reimbursement for the CP, even though title to the property remains SP.
Community would have no claim at all if a gift of the CP to the spouse owning the SP was intended and that could be proved. EX: W owns SP realty. During the marriage, CP is used to improve the property. At termination, the appreciation in value due to the improvement would be CP. EX: W owns SP realty that is subject to a mortgage or deed of trust. The realty is SP becaues it was acquired before marriage (or inherited/gifted during marriage) At the date of the marriage, or date of acquisition, if later, the value of the ownership equity is $70K, During the marriage $20K of CP funds are used to make payments of principal on the mortgage., and $10K of CP for interest. At termination the ownership equity has been increased to $120K, due to $20K reduction of the indebtedness lien, and the balance, due to inflation and market appreciation. Clearly the community should be reimbursed for the payment on the debt: $20K on principal and $10K on interest (unless the realty is the residence of H & W and the interest payments in effect represent a CP obligation for rent) Community could share in the $30K market appreciation in proportion to the $20K contribution. Where H bought realty before marriage, and paid 1/3 out of SP and the remainder was paid out of CP, the community interest would be 2/3. In both examples, the realty remains SP for management purposes, the community has either a lien or an equitable interest for its share. 3) If the realty is acquired during the marriage, with a down-payment of SP funds, but both H and W were obligated on the indebtedness for the balance, the property may be CP if title is taken in both names (with a gift of the down-payment). If title is taken in the sole name of the spouse who supplies SP for the down payment, the property should be considered mixed SP-CP in proportion to the amounts of the SP down payment and the CP obligation. |
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Classification of Property: SP or CP
Mixed Property: Separate Funds Used to Improve or Pay Encumbrance on CP |
Property remains CP. If one spouse uses her separate funds to make payments to reduce an encumbrance on CP or to improve CP, the transaction may be a gift (transmuting SP into CP) or a loan to the community (resulting in a claim for reimbursement), or may result in a claim by the SP contributor for a share in the appreciation. Again, the inception of title rule will control title, which will be CP. A court is likely to find a gift of the SP (transmutation to CP) in this case, perhaps invoking the presumption of CP. If no gift, then a variation of the Honnas rule would seem applicable, giving the SP contributor a separate claim to a share in appreciation of the CP, title to the asset remains CP.
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Classification of Property: SP or CP
Mixed Property: Separate funds used to imrpove or pay on CP: Distinguish expenditures on joint tenancy property |
AZ has drawn a distinction between expenditures on CP and expenditures on property held in joint tenancy. When SP is used to pay off an existing debt or or to improve CP, a presumption of gift to the community arises, and there must be an agreement between spouses before a contribution of SP to CP will entitle the owner of the SP to reimbursement. In contrast, no presumption of a gift applies when SP is expended on property held in joint tenancy; a right to reimbursement exists with respect to such expenditures absent evidence to the contrary.
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Classification of Property: SP or CP
Mixed Property: Business Based on SP: Apportioning Profits |
A H or W may have started a business before marriage, or acquired ownership by inheritance or by purchase with separate funds; the H or W devotes time during the marriage to the running of the business. Sometimes both spouses work at the business. What portion of the profit o fthe business, including appreciation of the value of business assets should be allocated to the community? The supreme court has now rejected the all-or-nothing rule that it had formerly used and has adopted the rule that hte increase must be apportioned. The burden is on the spouse who claims the increase in SP to prove the portion that is the result of the "inherent value of the property" itself. This should be the increase in dollar value due to inflation and any special increase inherent in the particular property.
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Classification of Property: SP or CP
Mixed Property: Business Based on SP: Computing Value: Possible Approaches |
Ct recognizes that there are several possible approaches and that different circumstances may justify use of a different approach. In cases where the bulk of the increase is due more to the inherent nature of the business rather than the efforts of the community, the better approach is to determine the reasonable value of the community's services (minus salary or withdrawals for community use) and deduct that from the increase, leaving the balance as SP. For a business involving realty, such as a ranch or an apartment complex, the rental value would be SP, and the balance of the income would be CP resulting form the labor, skill and management of the spouse. For other assets where the increase in value is due primarily to the labor of the spouse, allocating a reasonable rate of return on capital as SP with the balance as CP may be appropriate. The trial court must select the method that will "achieve substantial justice."
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Classification of Property: SP or CP
Mixed Property: Life Insurance |
Life insurance policies (and the proceeds of those on death of the insured) may or may not be CP. AZ Supreme Court has not yet committed to a definite rule
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Classification of Property: SP or CP
Mixed Property: Life Insurance: Term Insurance |
Since such insurance merely involves payment for current risk of death, policy has no value until death, and is CP or SP based on the source of funds for the premium.
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Classification of Property: SP or CP
Mixed Property: Life Insurance: Ordinary (straight life) and Similar Policies |
Premiums pay for current risk and also build reserves, and thus involve a "savings" element reflected in cash surrender value. If premiums during the marriage are paid out of CP, there are three possible approaches to classifying a policy bought before marriage or bought during the marriage with SP funds and intended to be SP.
I) Inception of Title: Treat policy as SP, payment of premiums out of CP would merely entitle the other spouse to reimbursement for one-half of those premiums 2) Proportionate Contributions: Prorate the value of the policy at divorce or the proceeds paid at death according to the proportion of CP premiums to the total premiums paid. 3) The Last Premium Rule: Would classify proceeds at death according to the nature of the last premium source, with reimbursement of the SP for cash surrender value attributable to those SP premiums. Although the supreme court has not passed on this issue, the courts of appeals favor the proportionate contribution rule. |
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Classification of Property: SP or CP
Mixed Property: Life Insurance: Spouse May Designate Another Beneficiary on a Community Property Policy |
AZ permits spouse named as owner on a CP policy to designate a third party beneficiary under the following circumstances:
1) Other Spouse Consents: One spouse may designate a 3rd party as beneficiary of a CP policy, where the other spouse consents to the designation, thereby estopping him from claiming CP rights in the proceeds at death. If the beneficiary is a child, grandchild, parent, brother or sister of either spouse, the statute creates a rebuttable presumption of consent. 2) Other Spouse Receives More than Half of CP Assets: A spouse, exercising her management power, may name a third-party as beneficiary if she does so without intent to defraud the other spouse of CP rights (i.e. where other spouse receives more than 1/2 CP assets at death) 3) Other Spouse Predeceases Insured: The insured spouse may name his own estate as alternative beneficiary in the event that the other spouse dies before or simultaneously with the insured. When the beneficiary-spouse predeceases the insured, no CP interest in a policy of term insurance ever comes into existence. |
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Classification of Property: SP or CP
Mixed Property: Pension and Profit-Sharing Funds-Retirement Benefits-Retirement Plans |
There may be CP rights in retirement systems. When employment giving rise to rights occurs over a period spanning marriage and non-marriage, the benefits must be apportioned accordingly. The employee's rights need not be vested in order to award CP to the other spouse.
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Classification of Property: SP or CP
Mixed Property: Pension and Profit-Sharing Funds-Retirement Plans:Gov't Employees |
Statutory provisions for gov't employees, making benefits personal to the employee and non-assignable, do not preclude a CP claim. The AZ SC ruled that divorce court could require state agency to make payment of the non-employee spouse CP share of retirement benefits directly to that spouse. As to federal employees, Congress has now amended relevant statutory sections to protect CP rights, thus eliminating any issues of federal preemption.
In Stokes v. Stokes, divorce court had assigned W a half interest in H's gov't retirement pension, but payments were to be made by H to W. When H fell in arrears, the ct. of app. said that W's claim for arrearage was as a creditor and could not be enforced by creating a trust of all payments until the arrearage was paid in full because of the statutory restriction on creditor's claims. |
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Classification of Property: SP or CP
Mixed Property: Pension and Profit-Sharing Funds-Retirement Plans:Determining CP Interest |
The CP interest in the fund may be determined by one of two methods: 1) present cash value, or 2) reserved jurisdiction, which postpones determination of the CP interest until payments are due at retirement. The first method is preferred when cash value can accurately be determined and there is other CP property to award to the non-employee spouse. This method avoids future court supervision and spares the parties further involvement.
Under some circumstances, reserved jurisdiction is more appropriate. Miller v. Miller: No evidence of actuarial value and rights contingent; McCarthy v. McCarthy: employee's rights would end at death prior to retirement. |
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Classification of Property: SP or CP
Mixed Property: Pension and Profit-Sharing Funds-Defined Contribution or Benefits Plans |
Two types of plans require different vlauation methods: 1) Defined contribution plan, in which an individual account is maintained for each employee, and 2) a defined benefit plan, in which benefits are not tied to contribution alone, but are based on a formula involving such factors as length of service and final salary. A defined contribution plan is valued according to the present amount in the account. A defined benefit plan requires actuarial determination of probable future benefits, discounted to present value. If benefits are not vested, (e.g. dependent on continued employment for a number of years) that would be a factor in determining present value. Other contingencies such as living until retirement age, would have to be valued. However, inflation and tax consequences are too speculative to be computed in arriving at value.
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Classification of Property: SP or CP
Mixed Property: Pension and Profit-Sharing Funds-Methods of Compensating Non-Employee Spouse |
If there is other CP equivalent in value to that of the community's interest in the plan, the employee spouse can be awarded the retirements benefits and the nonemployee spouse the other CP. If the other CP is insufficient, the court can order direct payment of one-half the CP portion of the benefits to the nonemployee spouse if the employee has retired. The employed spouse who is eligible to retire may not deprive the other spouse by postponing retirement.
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Classification of Property: SP or CP
Mixed Property: Disability Benefits |
A spouse has a CP interest in an injured spouse's disability benefits but only for injuries occurring during the marriage. This interest is limited ot the portion of the proceeds that represent compensation of the injured spouse's loss of earning potential during the marriage. The remaining portion of the proceeds is the injured spouse's SP. A spouse may also have an interest in disability benefits elected in lieu of retirement benefits.
EX: H took early retirement at the time the marriage was dissolved, entitling W to a CP interest in the benefits. Three months later, H suffered a heart attack, and H received an additional $400/mo as disability payments. W was not entitled to an interest in the additional money, but because the retirement plan provided that after H reached regular retirement age he would continue to receive the disability payment regardless of whether he remained disabled, W became entitled to a CP interest in the additional money after H reached retirement age. |
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Classification of Property: SP or CP
Education / License / Interest in Professional Corporation: Property, Agreement for Repayment |
1) Professional education and license: Not property.
2) Poss. recovery if agreement regarding future repayment proved: Spouse who supports the other for a degree may be able to recover on proof that a definite agreement (such as to provide education for the supporting spouse once the other was in practice) or upon a theory of unjust enrichment if repayment was expected in the future. |
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Classification of Property: SP or CP
Education / License / Interest in Professional Corporation: Maintenance, Stock in P.C. |
Maintenance may be granted on several idependent grounds, including a finding that the
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Professional Education and License:
Maintenance Award to Supporting Spouse |
Spousal maintenance can be granted on several independent grounds, including a finding that the spouse seeking maintenance "contributed to the educational opportunities of the other spouse" and "the extent to which the spouse seeking maintenance has reduced his or her income or career opportunities for the benefit of the other spouse." The TC must make findings concerning all the factors stated in section 25-319(b) with respect to which the parties presented evidence in determining the amount of such award.
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Professional Education and License:
Stock in Professional Corporation and Professional Goodwill--CP |
Stock in any professional corp can be CP even though AZ law bars transfer of such stock to any person not licensed to practice the profession
Goodwill in a professional practice, although intangible is an asset capable of valuation and distribution at divorce, regardless of the form of the business enterprise. -Spouse's professional partnership was divisible CP entitled to separate valuation -Method of valuation at TC discretion -Partnership agreement provisions limiting the value of goodwill were not dispositive in divorce proceedings. |
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Management and Control
-Pre 1973: |
H's exclusive management powers over CP were thought of as analogous to a trustee.
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Management and Control
-Present Law: --Relevant Statutes: ---Conveyance of Community Real Property |
A conveyance or encumbrance of CP is not valid unless executed and acknowledged by both H and W, except unpatented mining claims that may be conveyed or encumbered by the spouse having title or right of possession without the other spouse joining in the conveyance or encumbrance.
RELATES ONLY TO REAL PROPERTY |
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Management and Control:
-Management and Control |
Either spouse separately acquire, manage, control, dispose of CP or bind the community, except the joinder of both spouses is required in any transaction:
1) For the acquisition, disposition, or encumbrance in real property other than an unpatented mining claim, or a lease of less than a year; or 2) Of guaranty, indemnity or suretyship. |
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Management and Control:
Realty: Joinder Required Acts by One Spouse May Result in Individual Liability |
1) The signing spouse may be individually liable for breach of K to the extent of his separate property. (Ex: Spouse had no power to lease CP without joinder of other spouse, but would-be lessee could recover on warranty against signing spouse)
2) Non-Joined Spouse may be Estopped: Although joinder of both spouses is required for acquisition, disposition or encumbrance of real property, acts by one spouse alone may be upheld by the ct. on the equitable doctrine of estoppel where conduct of the other spouse makes it equitable to also bind him. EX: H enters into a K to buy an apartment building W participates in the negotiations and fails to object when, with her knowledge, H signs the K and gives a check drawn on their joint account. |
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Management and Control:
Personalty: Transfer |
Either spouse may transfer personalty.
EX: H has stock in his name, it is CP, he may sell the stock without his wife's consent. |
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Management and Control:
Personalty: Power to Bind Community |
Either spouse may K and bind the community.
W contracts to buy a new car, this creates a community debt. |
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Management and Control:
Personalty: Joinder Required for Guaranty, Indemnity or Suretyship |
Exception to the rule that either spouse may bind the community is made for Ks of guaranty, indemnity or suretyship.
EX: H signs as an endorser on his brother's to obtain a loan, the creditor could only recover from H's SP, and not from CP. Requirement of joinder applies even if community benefits from the guaranty, as where H personally guarantees a loan to a corporation, controlling stock being CP of H and W. |
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Management and Control:
Personalty: Gifts of CP |
Although AZ, unlike some CP states has no statute barring gifts of CP, a non-consenting spouse might sue to recover half of a gratuitous transfer by the other spouse on one of the following grounds:
1) Spanish law concept that gifts must be reasonable under the circumstances 2) Transfer may be a fraud on the CP rights of the nonconsenting spouse 3) each spouse has a fiduciary duty in the exercise of management powers. |
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Management and Control:
Personalty: Pending Divorce |
In all divorce or legal separation actions, a preliminary injunction is issued, enjoining both spouses from "transferring, encumbering, concealing, selling or otherwise disposing any joint, common or community property of the parties except as in the usual course of business or for the necessities of life, without the written consent of the parties or permission of the court.
The purpose of the injunction is to prevent dissipation of the marital wealth, and does not bar one spouse from converting a joint tenancy into a tenancy in common by conveyance to a strawperson and back. |
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Management and Control:
Electing Retirement Benefits |
As to retirement plans covered by the Employment Retirement Income Securities Act (ERISA) the act requires the employed spouse at the time of retirement to take a joint and survivor annuity with the other spouse unless the latter consents to a different form of annuity. As to other plans, there are not AZ cases, and the only limitation is general law requiring the manager of CP to act for the benefit of the community.
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Debts and Obligations:
Statutory Provisions: Liability of CP and SP for Community and Separate Debts |
1) The separate property of a spouse shall not be liable for the separate debts or obligations of the other, absent agreement of the property owner to the contrary.
2) CP is liable for the premarital separate debts or other liabilities of the other spouse, incurred after 9/1/73, but only to the extent of the value of that spouse's contribution to the CP that would have been each spouse's separate property if single. 3) CP liable for a spouse's debts incurred outside of this state during marriage that would have been community debts if incurred in AZ. 4) Except as prohibited, either spouse may contract debts and otherwise act for the benefit of the community. In an action on such a debt or obligation, the spouses shall be sued jointly and the debt or obligation shall be satisfied first from the CP and second from the SP of the spouse contracting the debt or obligation. |
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Debts and Obligations:
Statutory Provisions: Debts or other liabilities Incurred before Marriage |
Debts or liabilities incurred before marriage are classified as separate and collectible out of the SP of the person who incurred them. To prevent what was called "marital bankruptcy" the legislature in 1973 allowed the creditor to also reach the contribution of that spouse to CP. The amendment applies only to debts or liabilities incurred after 9/1/73.
Purpose is to prevent the avoidance of debt by voluntary act of marriage. To obtain an enforceable judgment against debtor's spouse's CP, the nondebtor spouse must be joined in teh lawsuit. EX: W borrow money while single to finance her education, and later marries H and is employed in a well-paying position. W's salary is CP, but it could be reached if the loan were made after 9/1/73, but not before. Any of W's SP would be liable for the debt. EX: Before marriage H signed a guaranty. After the marriage, a default occurs, and H is asked to answer on his K for guaranty. Creditors may collect from CP to the extent of H's contribution. |
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Debts and Obligations:
Statutory Provisions: Child Support Obligations |
Obligation of H for support of a child from a previous marriage was a premarital obligation, hence the wages of his second wife could not be reached to satisfy the child support obligation. Furthermore, no portion of the second wife's wages may be treated as H's income for purposes of calculating his child support obligation from a previous marriage.
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Debts and Obligations:
Statutory Provisions: Debts Incurred During Marriage |
Presumed to be community obligations. Spouse creating the debt must intend to benefit the community, although the intent to benefit the community does not have to be the only or primary intent. A party contending that a debt is not a community obligation may overcome the presumption with clear and convincing evidence that the debt is a separate obligation of one spouse.
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Debts and Obligations:
Statutory Provisions: Debts Incurred During Marriage: Power to Bind Community |
As discussed above, one spouse has the power to bind the community. Hs and Ws have the same power to K.
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Debts and Obligations:
Statutory Provisions: Debts Incurred During Marriage: Creditors Can Reach CP |
A community creditor can reach CP and after that is exhausted, the SP of the spouse contracting the debt. A community obligation is not to be satisfied from the SP of the spouse who did not K the debt or obligation.
Both spouses should be joined in the lawsuit if the CP is to be reached. |
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Debts and Obligations:
Statutory Provisions: Debts Incurred During Marriage: Promissory Note |
If both spouses sign a promissory note, the obligation becomes joint and several; creditor can reach both CP and SP of both.
However, merely signing a personal financial statement in support of modification of a loan does not constitute ratification by the nondebtor spouse of the original obligation. Reacquisition: Reacquisition of a note destroys the original obligation. EX: H and W signed a promissory note and mortgage to H's father. When H's father died, H got the note and mortgage back as part of the estate distribution. H then unilaterally assigned the note. After H and W divorced, W received the house in the settlement. Hs' creditor on the note tried to go against W. The court held that the obligation signed by H and W no longer existed because the reaquisition destroyed that obligation. |
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Debts and Obligations:
Statutory Provisions: Mortgage is Not Debt |
A mortgage is not considered debt, a mortgage is security for a debt.
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Debts and Obligations:
Tort Obligations |
Similar rules apply to a tort committed by one spouse. If the spouse is acting in the interest of the community, it is a community obligation. If not, it is a separate obligation.
EX: W, while driving to play tennis with H, negligently injures X. X can sue both spouses and recover from CP and if that is inadequate, go after W's SP. EX: H owns separate farmland, While driving to inspect the land, he negligently injures P. This would be a separate tort, and any judgment would be collectible only from H's SP and not from CP. AZ has not allowed a P to reach tortfeasor's share of CP even though there is no SP to satisfy the judgment. |
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Debts and Obligations:
Tort Obligations: Where Liability Will Attach |
1) For CP to be liable, the key inquiry is: Was the spouse acting for the purpose of benefiting the community? This rule applies REGARDLESS of whether the act by the spouse was:
1) Intentional 2) Willful and wanton 3) Might have involved possible criminal sanctions; or 4) Resulted in any benefit in fact to community. |
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Debts and Obligations:
Tort Obligations: Where Liability Will Attach: Special Rule for Intentional Malicious Torts |
If the tort committed by one spouse is intentional and malicious, the community will be liable only if the other spouse consents to or ratifies the tort or there is actual benefit to the community.
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Debts and Obligations:
Tort Obligations: Where Liability Will Attach: No Presumption of Community Purpose |
Unlike K area, there is no presumption of community purpose in tort. This must be alleged and proven by the P, and all the circumstances relevant to the event may be looked into so that the community purpose may be determined.
EX: If one spouse negligently causes an auto accident, to recover against CP, P must allege and prove that the spouse was on a community errand when the accident occurred. |
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Debts and Obligations:
Tort Obligations: Requirement of Joinder |
To recover against CP, both spouses must be joined as D's just as in a K suit. Failure to join leaves only recovery against the SP of the spouse who committed the tort. This rule has been applied even where the tort was committed in a common law state and a judgment was obtained there against the tortfeasor.
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Debts and Obligations:
Tort Obligations: Survival of Liability After Death of Negligent Spouse |
By statute a cause of action against a spouse who died while negligently causing injury to another party survives the death of the spouse. Thus, CP remains liable for any damages caused by the negligent spouse.
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Debts and Obligations: After Death
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Although CP is not subject to the claim of a separate debt during the lifetime of both spouses, on teh death of one spouse, the community is severed, and the separate creditor can then reach the half interest of his debtor after community claims are paid.
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Debts and Obligations: After Divorce
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Although ct. in dissolution may allocate responsibility for payment of community debts to one spouse, it does not have to do so. Debts not allocated by the court remain the joint obligations of the parties. Any allocation made by the court is not binding on the creditor, because the creditor is not a party to the proceeding, nor does the court have power to direct sale of the CP and payment of a debt. The creditor could therefore pursue CP assigned to the other spouse. The allocation only determines rights between the former spouses.
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Dissolution: Transmutation
Generally, Community Dissolves When: |
1) decree of dissolution of marriage
2) Service of petition for disolution or legal separation occurs (if decree results) occurs 3) When one spouse dies 4) By agreement of the spouses or transfer to one spouse as SP. |
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Dissolution: Transmutation
DIssolution of the Marriage |
In an action for dissolution of the marriage, separation, or disposition of property after separation the court has broad powers to divide and distribute property, includign the power to impose a lien on separate property of a party to secure child support, spousal maintenance, or any interest that the other party has in the property.
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Dissolution: Transmutation
DIssolution of the Marriage: General Power of Divorce Court Over Property |
Prior to the revision of the statute in 1973, the ct. had power only to assign each spouse's separate property to that person, and to divide CP equitably, but now the court can also divide property held in joint tenancy, tenacy in common property, and quasi-community property--i.e. property that would have been CP had the spouses been domiciled in a CP state at the time of acquisition.
EX: H & W life in a SP state (e.g. Illinois) and H's salary is invested in stock. Later, they move to AZ and are domiciled here. Although technically SP, the court can divide the stock as though it is PC. |
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Dissolution: Transmutation
DIssolution of the Marriage: Equitable Division of CP |
Court can divide CP equitably. The statute gives the divorce court broad power; the division does not have to be "in kind" (one spouse must be awarded certain assets and the other spouse different assets) There must be a substantially equal division in the absence of sound reason. Clearly, marital fault is not a factor, nor apparently is unequal contribution to the CP or a greater managerial ability. However, wrongful dissipation or destruction of CP or other common property by one souse does permit a court to make an unequal division to ensure equitable treatment of the innocent spouse.
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Dissolution: Transmutation
DIssolution of the Marriage: Division of Joint Tenancy and Tenancy in Common Property |
JT and TIC property is divided equitably by the courts along with CP. Since shares in TIC are only presumed to be equal, the ct. may find depending on contributions by each spouse and any intent to make gifts that they own unequal shares. Even in a joint tenancy case, a court has discretion to consdier "excessive or abnormal expenditure, destruction, concealment or fraudulent disposition" of the property in determining how to equitably divide the property. The court has allowed unequal distribution of property held in JT because the husband paid for the property entirely from his SP, W made no contribution to the purchase and the marriage lasted for only two weeks.
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Dissolution: Transmutation
DIssolution of the Marriage: Quasi CP |
When couples move from CL states to AZ, their accumulated wealth is SP when acquired and retains that character even when later reinvested in AZ> However, by statute this property is divided as thought it were CP.
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Dissolution: Transmutation
DIssolution of the Marriage: Omitted Property |
If CP or JT property is overlooked in the settlement agreement and the divorce decree, the statute coverts the property into TIC. This is particularly important if the property was held in JT and one spouse dies after the dissolution.
IF property that would ahve been held as SP at the time fo the divorce is omitted and the law later changes so that the proeprty woudl be CP, the policy favoring finality of divorce decrees could foreclose a later claim under the statute. --Applies to pension plans: Ct. has held that W had tenancy in common rights to H's pension benefits where pension was not mentioned in the parties 1977 divorce settlement. |
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Dissolution: Transmutation
DIssolution of the Marriage: Covenant Marriage |
A covenant marriage arises when both parties to the marriage sign a written statement declaring that their intention is to enter into a CM with the understanding that such a union is for life and therefore commit themselves to taking all reasonable efforts to preserve the marriage should problems arise. Consequently, obtaining a decree of dissolution of marriage or even granting a legal separation is considerably more difficult than in a "conventional marriage." Once a decree is entered, the same property division rules apply.
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Dissolution: Transmutation
DIssolution of the Marriage: Covenant Marriage: Terms |
1) Two year separation is required--ct. will not enter a decree of dissolution until the parties have been living separate and apart continuously without reconciliation for at least two years prior to filing. IF the parties have not met the time requirement, the action will be stayed for the time remaining until the two years have been reached.
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Dissolution: Transmutation
DIssolution of the Marriage: Covenant Marriage: Terms, Exceptions |
The corut may enter a decree of dissolution of marriage or legal separation notwithstanding the souses commitment to the covenant marriage IF:
1) Respondent spouse has committed adultery 2) Respondent spouse has been incarcerated 3) Respondent spouse has committed DV against the filing spouse or a relative of any spouse residing in the marital domicile. 4) Respondent spouse has habitually abused drugs or alcohol 5) Respondent spouse has abandoned the marital domicile for at least one year prior to the filing and refuses to return 6) Both spouses agree to a dissolution of the marriage. |
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Dissolution and Distribution on Death
Distribution on Death: Power to Dispose by Will Decedent's Interest |
The decedent's estate is made up of his one-half interest in the CP and all of his SP. The decedent's one-half interest in the CP and all of his SP will pass according to the terms of his will. However, in the case of intestacy, the separate estate passes according to the provisions of the Arizona statute, which provides that the surviving spouse receives the entire estate if the surviving spouse had no issue, or all the issue are also the issue of the surviving spouse. In the event of surviving issue who are not the issue of the surviving spouse, one-half of the decedent's SP and no interest in the decedent's CP passes to the surviving spouse. Where less than all fo the CP passes to the souse, the heirs and devisees receiving a part hold that part as tenants in common with the surviving spouse.
Survivor's Interest: The survivor's half-interest, which fully vested during the course of the marriage, is not subject to testamentary disposition by the decedent spouse. The surviving spouse is not an heir, but rather takes one half of the CP as the owner. |
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Dissolution and Distribution on Death
Distribution on Death: Property Subject to Administration |
By statute, a surviving spouse's share of CP is subject to administration until the time for presentation of claims has expired, and then only to the extent necessary to pay community claims. If a H & W both die, half their CP is subject to administration in each estate, and community claims will be charged pro rata to each half of the CP.
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Distribution on Death: Payment of Claims: Community or Separate: Expenses of Administration: Presentation of Claims
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By statute, all claims of the community estate must be presented by the creditors against the executor or administrator of the estate; unpresented claims are barred against the decedent's half of the CP by this section, but not against the surviving spouse's half.
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Distribution on Death: Payment of Claims: Community or Separate: Expenses of Administration:
Classification of Claims |
By statute, the personal representative of the estate of a deceased spouse may classify a claim as a community claim payable out of CP or a separate claim payable out of SP and the balance of the decedent's half of CP. Either classification constitute a disallowance in part; failure to give notice of the classification to the claimant, or failure to classify an allowed claim, has the effect of allowing the claim as payable out of either SP or CP, whichever is more beneficial to the claimant.
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Distribution on Death: Payment of Claims: Community or Separate: Expenses of Administration: Charging Debts and Expenses
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The Probate Code provides that in the case of an estate containing both SP and CP community debts are charged against CP; separate debts are charged against SP, and against the balance of decedent's half of the CP in proportion to the relative value thereof, but any special expenses attributable to management of CP may be charged against the entire CP.
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Distribution on Death: Widow's Election
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One spouse may by will expressly attempt to dispose of the surviving spouse's community share in specific property or in all CP, devising an interest in the testator's community share or in Sp to the surviving spouse in exchange. Thus, teh testator may expressly by will devise all of the CP, including the interest of the survivor into a trust for the surviving spouse, with an alternate disposition of hsi half interest if the spouse elects against the will. Alternatively, the testator may devise a lump sum on condition that the surviving spouse forego any claim to CP. The surviving spouse may elect to keep her CP interest and give up benefits under the will; the spouse may not claim her interest and also attempt to take under the will.
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Distribution on Death: Widow's Election
Will Requirements |
The will must manifest an intent to devise both halves of the CP to force an election. There is a presumption that the testator intended to devise only his CP interest. A general devise of "all my property" or "all my right, title and interest" in specific assets would mean only the T's half. OTOH, a specific devise of "all securities in my name" could be construed to mean both halves of the CP. A specific devise of certain real estate "which is my sole and separate property" would seem to require an election even if the T was mistaken and the property was CP in whole or in part.
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Distribution on Death:
Quasi-CP |
Unlike the statutes on dissolution of marriage by court decree (divorce) the UPC contains no provision for quasi-community property. If a spouse has Sp that was accumulated while the couple was domiciled in a common law state, she can dispose of that SP by will and the surviving spouse can claim no interest (the only protection against disinheritance consists of the statutory allowances and exempt property under the Probate Code.)
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Distribution on Death:
Is Community Property Right in Each Item or in Aggregate? |
Although normally CP is thought of as a right in each item of property, there is some authority in AZ that the surviving spouse has only a right to take half the total CP.
EX: W could not claim one half of the proceeds of CP life insurance, made payable by H to a son by a prior marriage if she received half the total CP because H would not be acting in fraud of W's rights. |
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Dissolution by Transfer or Agreement:
Transfer |
CP may be transferred by one spouse to the other spouse as SP. Such a transaction constitutes a tax-free gift of a one-half interest to the donee spouse.
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Dissolution by Transfer or Agreement:
Agreement |
A H & W may enter into an agreement that existing CP belongs to either or both of the spouses as SP. They might agree that property subsequently acquired should be the SP of the acquiring spouse.
EX: H & W are both employed, they agree to pay family expenses on a specified basis, and surplus earnings will be the SP of the earner. |
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Special Forms of Property:
CP and Joint Tenancy |
Property held in JTWROS is not community property, but rather the SP of both spouses. However, on dissolution, property held in joint tenancy is subejct to equitable, not equal, division.
EX: Both H and W own realty in JTWROS, Each can convey her half as SP (unless it is the homestead) The separate creditors of either may levy on one half. |
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Special Forms of Property:
CP and Joint Tenancy: Joint Property Acquired with CP: CP Unless Consent Obtained |
If one spouse uses CP funds to acquire property in joint tenancy, the other spouse may claim a CP interest if the acquisition in Joint Tenancy form is made without the spouse's consent. Although such consent is customarily obtained by having the H and W as grantees on a deed to realty sign a K, other evidence may be used. If the spouse owning SP transfers it into both names as joint tenants, or uses it to purchase property in both names as joint tenants, or uses it to purchase property in both names as joint tenants, there is a very strong presumption of a gift to the other spouse.
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Special Forms of Property:
CP and Joint Tenancy: K Rights for Sale of Joint Property Presumed CP |
If the spouses, owning in joint tenancy, K to sell the property and the K does not expressly provide otherwise, the vendor's rights under the K become CP because of the normal presumption
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Special Forms of Property:
CP and Joint Tenancy: Joint Bank Accounts: After One Spouse's Death |
CP funds deposited in a joint bank account are governed by special rules affected byt eh Arizona Probate Code sections on multi-party accounts. Since on the death of any party to a joint account the balance presumably belongs to the survivor, the Baldwin rule applies: IF the deposit was made with the consent of both, on death of either spouse the balance belongs to the survivor (hence,can't be claimed as decedent's share of CP by heirs or devisees)
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Special Forms of Property:
CP and Joint Tenancy: Joint Bank Accounts: During Joint Lives |
During their joint lives, where deposits are made on a joint account, the account belongs proportionately to the parties according to their net contribution unless there is evidence of a gift. This if one spouse deposits SP in a joint account, and no other funds are deposited, the account presumably remains SP of that spouse. If SP funds are deposited along with CP funds, a problem of commingling is presented.
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Special Forms of Property:
Federal Property |
Certain forms of property take their property incidents from federal law. US Gov't bonds are an example. Because they are issued under federal law, these laws preempt state law. Other forms of property fall in the same category. Congress has in recent years specifically authorized divorce courts to treat many federal benefits as CP.
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Special Forms of Property:
Federal Property: National Service Life Insurance, US Savings Bonds |
NSLI has been held to belong on death to the named beneficiary, despite a claim of the surviving spouse that the insurance was CP.
OTOH, where H invested CP funds in US Savings Bonds, in co-ownership with his brother, his wife was able to reach on half of her CP; the treasury Regulations expressly recognize fraud as an exception and the transfer of CP funds would be so treated. |
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Special Forms of Property:
Federal Property: Social Security Benefits |
Social Security Benefits are not subject to CP. The Social Security System itself contains provisions for a surviving spouse and for certain divorced spouses.
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Special Forms of Property:
Federal Property: Railroad Retirement Benefits |
The SP of the employed spouse to the extent that those benefits parallel Soc. Sec. benefits. Supplemental benefits provided by the Railroad Retirement Act may be treated as CP by state divorce courts.
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Special Forms of Property:
Federal Property: Military Retirement Benefits |
In 1982, Congress enacted the Uniformed Services Former Spouses Protection Act. That act restored the power of the state courts to treat nondisability retirement as CP. HOwever, the act does not extend this treatment to disability benefits, even if a retiree elects to receive disability benefits in lieu of retirement benefits that he is otherwise entitled to. Hence, these benefits remain the Sp of the military person. The Act also made provision for direct payments to former spouses if the marraige lasted 10 years during military service, but limited to not more than 50% of disposable retirement pay. AZ Supreme Ct. held that it woudl treat military retirement pay as CP to the extent the benefits were derived from community efforts. The court further held that its decision would apply retraoctively to the date of the McCarty decision.
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Special Forms of Property: Private Pension Plans
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ERISA specifally allows state law CP divorce distribution of ERISA regulated pensions earned during marriage. Nevertheless, SCOTUS has held as a matter of federal preemption that ERISA anti-assignment provisions prohibit the testamentary transfer by a nondivorced, deceased spouse of her state law community proeprty interest in her surviving spouse's ERISA regulated private sector pension. The court reasoned that any transfer away from intended ERISA beneficiaries to third parties would defeat the purpose of ERISA to provide retirement support to plan participants and their spouses. The rational of Boggs would seem equally to limit teh testamentary power of a pensioner to will away his state law community proeprty interest in any ERISA benefit payable to his surviving spouse.
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Special Forms of Property: Federal Civil Service Retirement Benefits
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Federal Civil Service Retirement Benefits are subject to CP rights. The governing statute does not contina the statutory provision specifically excluding CP rights, but makes benefits subject to any court decree.
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Special Forms of Property: When State CP Law is Preempted: Special Problems Arise:
Fed Benefits |
Local ct. cannot offset federal benefit with other CP and avoid the preemption. Whether the ct. could consider the federal benefits in deciding what an equitable division of the CP should be is not settled, although this may be precluded also.
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Special Forms of Property: When State CP Law is Preempted: Special Problems Arise:
Final Decree of Property Division Cannot Be Reopened |
When a decree dividing property becomes final, it cannot be reopened, even if SCOTUS decides that federal law preempts state CP laws. Thus, McCarty did not mean that property divisions made by the AZ courts on teh premises that military retirement benefits were CP were invalid. This is similar to the doctrine of res judicata, applicable to property divisions if the stat supreme court later changes a substantive rule, such as classification of persoal injury recovery or elimination of the vesting requirement for pension plans. If a final decree has not been entered, the trial court should apply the new law, even if the case is on remand and the court is deviating from prior instructions of the appellate court.
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Special Forms of Property: When State CP Law is Preempted: Special Problems Arise:
Final Decree of Property Division Cannot Be Reopened --Statutory Exception |
Because the Uniformed Services Former Spouses Protection Act has special provisions relating to retroactivity of some of its sections the AZ Supreme Ct. has held that divorce decrees denying CP rights on the basis of McCarty may be reopened under the ARS ann. section 25-327(a) and CIvil Procedure Rule 60 unless property settlement agreement assigned the military benefits to the service spouse regardless of future changes in the law.
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