When Separate Property is Used to Buy Community Property in Arizona

Tue 22nd Dec, 2015 Arizona Community Property Laws

Some people have asked whether the court takes consideration of separate property contributions when dividing community property in Arizona.

Luckily, the Arizona Court of Appeals answered that question in the case of In Re Marriage of Inboden.

Equitable Division Versus Equal Division of Community Property in Arizona

In Arizona, a divorce court must divide a home that is marital property equitably and, absent other factors, equitable means equally.

However, a court can fashion an equitable division that is not equal after considering the length of the marriage, the contributions of each spouse’s separate property to purchasing or fixing up the house and similar factors.

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A Court Cannot Simply Divide Community Property Based on a Percentage of Each Spouse’s Contributions of Separate Property

The question sometimes arises as to what a court may do when separate property is used to buy community property in Arizona.

In the case of In Re Marriage of Inboden, 225 P.3d 599 (Ariz. Ct. App. 2010), the Arizona Court of Appeals discussed whether a divorce court can divide the equity in a marital home solely on the basis of each spouse’s contribution of separate property to its purchase.

Husband and Wife married in 2005. Just before the marriage, Wife invested $90,000 of her own money in a piece of land.

After the marriage, the couple built a house on that land, with Wife using $67,000 of her separate funds and Husband paying $46,500 of his separate funds. T

he house was finished a year after the marriage, and the spouses transferred ownership to the community property into joint tenancy with rights of survivorship.

However, Husband moved out after a few months and Wife filed for divorce the following year. The main argument at trial concerned the division of the equity in the marital residence.

The court divided it according to the percentage of separate property each spouse invested in it – with Wife receiving about three times the amount Husband was awarded. Husband appealed that decision to the Arizona Court of Appeals.

Equity Factors Control the Equitable Division of Community Property Purchased With Sole and Separate Property

Separate Property Used to Buy Community Property in Arizona.

Husband argued that he was entitled to one-half of the equity in the property. He claimed that when he and Wife transferred separate property into joint tenancy, it was a gift to the community.

The Court of Appeals agreed with the general proposition that placing the property in joint tenancy constitutes a gift to the community, but noted that jointly held property was subject to equitable, not equal, division.

A Spouse if Not Entitled to Reimbursment of a Gift of Separate Property to the Community in Arizona

The Court of Appeals noted that in Arizona, a divorce court has broad discretion in how to divide property and debts between spouses. But it cannot order an unequal division of marital property solely to pay back one spouse for separate funds used to buy the property.

On the other hand, a court can consider the contributions made by each spouse as part of the whole picture when it determines a fair way to divide the marital property.

Factors a Judge May Consider When Equitably Dividing Community Property Purchased With a Gift of Separate Property in Arizona

In fact, the court should consider all relevant factors, including how long the marriage lasted, the contributions of each spouse to the community property, such as labor used to build or improve the property, the source of funds used to buy the property to be divided, and the overall division of debt.

In the Inboden divorce, the trial court based the division completely on the separate fund contributions of each spouse. Therefore, the Court of Appeals sent the case back to the trial court for another evaluation of all relevant factors when dividing the community property purchase with the spouses’ sole and separate property.

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If you need information about consideration of separate property contributions when dividing community property in Arizona, you should seriously consider contacting the attorneys at Hildebrand Law, PC. Our Arizona community property and family law attorneys have decades of combined experience successfully representing clients in dividing community property and family law cases.

We also have a way to undo the mistake of using separate property to buy a community property home in Arizona through a well-crafted postnuptial agreement.

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Call us today at (480)305-8300 or reach out to us through our appointment scheduling form to schedule your personalized consultation and turn your Arizona family law case around today.

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