Guide to Community Property Division for Business Owners in Arizona

Arizona is one of nine states that follows a “community property” definition of marital assets.  In the most basic sense, in Arizona, property acquired during a marriage by either spouse is deemed “community property” belonging to both spouses equally, regardless of which spouse paid for or did the work to obtain that property, and regardless of in whose name title to the property was taken. Community property includes wages and earnings of a spouse, tangible property acquired during marriage, and the proceeds of community property (e.g., investment income). In contrast, property brought into the marriage by one spouse, acquired by gift or inheritance, or designated as belonging to one spouse or the other by agreement, constitutes “separate” property belonging only to one spouse.

In a divorce, Arizona spouses generally have an equal, 50/50, right to share in community property, but each retain “separate” property for themselves. That might seem like a straightforward concept when it comes to distributing the contents of a savings account. It can get complicated, however, when the marital assets to be characterized and divided comprise ownership interests in, and proceeds of, an operating business.

In this blog post, we briefly discuss the effects of community property rules in an Arizona divorce where the assets at issue include ownership interests in and proceeds of an Arizona business. For answers to specific questions about how Arizona law may characterize your ownership of and proceeds from your business in a divorce, contact an experienced Arizona family law and business attorney today.

Ownership Interests: Separate or Community Property?

An ownership interest in a business, be it corporate stock, membership units of a limited liability company, or interests in a partnership, may constitute “community” or “separate” property under Arizona law. Generally, how they get characterized depends upon how they were acquired. For example, if a spouse incorporates an LLC to operate a business after getting married, then even if that spouse is the sole owner of the membership interests of that LLC, the interests likely constitute community property. In contrast, if a spouse already owns interests in a business before marriage, then the interests likely constitute “separate property.”

As a basic proposition, business ownership interests that constitute community property must be divided equally in a divorce, no matter what implications the division might have on the management, control, or operation of the business itself. This can cause significant complication for a business owner and for the business itself. For example, suppose a spouse and a third party form a business during the spouse’s marriage in which the spouse owns 60% of the business and the third party owns 40%. Absent agreement to the contrary, in a divorce the spouse’s ownership interest would be divided, leaving the spouse with just a 30% ownership interest in the business and giving the business a new 30% owner, the spouse’s ex. Further complication could follow from that eventuality if, for example, the LLC agreement barred transfer of the LLC’s interests, or allocated management rights according to ownership interest.

Because of the potential complications above (which merely illustrate one scenario in a vast array of business-related headaches that can occur in an Arizona divorce), spouses who form Arizona business entities after marriage are well-advised to enter into agreements with their spouses that expressly characterize ownership interests as either “separate” or “community” property, and into agreements with their business partners that contemplate the eventuality of an owner getting divorced.

Business Proceeds: Separate or Community Property?

As if the complications described above were not enough to make your head spin (if you don’t have the help of experienced family law and business counsel, that is), Arizona law can make division of business ownership proceeds even more tricky. That is because even if business ownership interests constitute one spouse’s separate property, Arizona law may, in some circumstances, characterize the proceeds of those ownership interests – distributions, dividends, or capital appreciation, for example – as community property.

To be clear, Arizona law sets a baseline rule that proceeds of separate property also constitute separate property. But not always. Proceeds of business ownership interests that constitute separate property could still be characterized as community property if:

• The proceeds reach the owner spouse in a form commonly characterized  as community property, such as if a business pays a salary to the spouse, rather than making dividends; or
• The proceeds if the business are attributable to the efforts of the non-owner spouse.

Speak with an experienced Arizona family law and business attorney to evaluate whether how community property rules may affect how you receive income from a business you own, and how your spouse’s contribution to the marriage may affect the characterization of proceeds of those business interests.

How Arizona Lawyers Help to Plan for Business-Related Community Property Issues

The best way to navigate community property division of Arizona business ownership interests and proceeds is to plan ahead. Through the careful execution of prenuptial and postnuptial agreements, as well as agreements among business owners (such as LLC Agreements and stockholder agreements), business owners in Arizona can plan for the eventuality of a divorce and spare themselves significant difficulty and financial strain if it happens.

Should you find yourself in the position of not having planned ahead for how your business assets would be divided in a divorce, the advice and counsel of an experienced family law attorney may well prove critical. You may , for example, need to prove that certain business ownership interests constituted separate property, or that your ex-spouse did not materially contribute to the enhancement of the business in a manner that would transform proceeds into community property. Consult with an Arizona family law and business attorney as soon as possible if you are facing a divorce that your business planning never contemplated.

Unwary Arizona business owners can easily find themselves neck-deep in a thicket of legal complication by failing to consider the impact of the state’s community property rules on their business. Do not wait to seek sophisticated, experienced legal counsel. Contact a skilled, experienced Arizona family law and business lawyer today to gain an understanding of your rights. Call (602) 252-1968 to speak to one of our attorneys.

The number of married couples divorcing after the age of 50 has been rising in recent years. In some ways, divorce later in life is simpler. The kids are grown so support and visitation are rarely issues. In other ways, ending a long-lasting divorce later in life presents challenges that require added consideration.

Divorce typically leaves both spouses in worse financial condition than while married. Creating a post-divorce financial plan becomes more critical when marriages end late in life. A full inventory of assets and their values must be made. Division of assets and debts should be decided based on life expectancy, age difference and potential sources of post-divorce income.

Younger ex-spouses generally find opportunities to recover and have adequate time to pursue them. The opportunities and time to recover for spouses divorcing late in life are usually much more limited. To ensure both spouses are financially secure after divorce, property and debt distribution often require different considerations than needed when spouses are young.

Home ownership. Disposition of a family home for young couples is usually straightforward for Phoenix, Arizona residents. Either the spouse with primary custody of the children will often keep the home or the property will be sold and profits split between the spouses. Older spouses should not automatically decide to sell the property as it may prove financially beneficial for one spouse to keep the home.

A reverse mortgage can provide a consistent source of income once a homeowner reaches 62. Access to government aid programs such as Medicaid and veterans’ pension programs may be limited by financial assets but not by equity in a primary residence. Seniors who have $100,000 in the bank may be prevented from accessing some programs they could otherwise use if that same $100,000 was in home equity.

Senior homeowners often enjoy property tax breaks and utility discounts but must live in the home to benefit. Even if a spouse foregoes those benefits by moving from the home, the property can generate a steady source of income as a rental, particularly in hot real estate markets. Alternatively, the ex-spouse may remain in the home but rent a room or a section of the home if feasible.

Retirements and pensions. In general, spouses are entitled to half the retirement or pension benefits earned during the marriage by either spouse. When both have retirement accounts, it may be simpler to just agree that each will keep his or her own account. Where one spouse does not have a retirement account or where there is a significant difference in account values, provisions must usually be made to divide the accounts.

Retirement and pension account provisions vary. Some may allow distribution of funds soon after divorce. Others may restrict distribution until one or both spouses reach a specific age. Extra time and effort may be required to obtain valuations of funds in these programs and to draft required paperwork such as a Qualified Domestic Relations Order to access the funds. Full knowledge of account values is essential to accomplish a fair distribution of property.

Social Security. While generally not an issue for younger couples, for spouses nearing 60 this issue holds great importance. A divorce decree cannot allocate Social Security benefits. Distribution is based on federal law. At age 62 a person married for 10 years can claim half of an ex-spouse’s Social Security benefit without reducing the amount to which that spouse is entitled. If the ex-spouse dies after 10 years of marriage, the survivor may be able to claim the full benefit at age 60.

For a person with a limited work history, obtaining a Social Security benefit based on the spouse’s work record can provide substantial income. If the marriage has not lasted 10 years, it may be wiser to consider a legal separation or other arrangement at least until requirements are met to access Social Security benefits.

Health insurance. One spouse often faces loss of health insurance coverage after divorce. Options may include extending existing coverage via COBRA provisions in the current policy or requiring the spouse with insurance to pay for all or part of a policy covering the soon-to-be uninsured spouse at least until that spouse becomes eligible for Medicare. A spouse already eligible for Medicare might also consider requiring the spouse with greater income to pay the cost of a Medigap insurance policy to supplement Medicare coverage.

The option of legally separating for a period rather than divorcing might be considered as well. Since the marriage remains legally intact, the insured party’s health insurance policy will usually continue to cover the other spouse.

Alimony and life insurance. Spousal maintenance or alimony can only be logically considered once the value and intended disposition of property is determined. If both spouses have been actively employed during the marriage and earning comparable salaries, alimony may not be needed. However, where one spouse left the job market for a considerable period to be the primary caretaker of the children, the requirement to pay alimony becomes more likely. The reality for at least one spouse in many late-in-life divorces is that opportunities will be limited to re-enter the job market at a salary sufficient to achieve financial independence.

When alimony is ordered in a divorce involving older couples, the person paying should be required to maintain a life insurance policy naming the alimony recipient as beneficiary. This protects the recipient from being cut off from a stream of needed income should the payer unexpectedly die.

Estate planning. Once the divorce is final, ex-spouses should revise wills, medical directives and other documents that designate beneficiaries or have given power of attorney to the other spouse. Spouses may want to consider whether the divorce decree should include provisions to establish trusts or require that specific provisions be maintained in each person’s will for benefit of children.

Couples in a long-term marriage generally have accumulated more assets over time.

Anyone contemplating divorce would be wise to consult an attorney for advice and assistance. Particularly when a divorce comes late in life, the guidance of a tax consultant may prove equally necessary and valuable as most divorce issues basically involve a numbers game. Legal and financial assistance can help ensure you obtain a fair division of assets to provide financial stability for years to come.

Discuss Your Options at an Initial Case Review with DeShon Laraye & Pullen PLC

At DeShon Laraye & Pullen PLC, we know how to navigate the complexities that surround child custody issues skillfully. You don’t have to face the court or your ex alone in court. Contact one of our divorce attorneys for an initial case review. You can schedule a meeting with our divorce team by calling (602) 252-1968 or sending us a message via our online request form.

“Ghosting” is a phenomenon that occurs when someone you know just suddenly vanishes or refuses to respond to your communications without a given reason. When it happens between a married couple, the action of the spouse, who “ghosted” you, is committing spousal abandonment in the State of Arizona.

You do not want to stay in the marriage but may feel like you do not know where to turn after discovering you must serve divorce papers. The reassuring news is that you have options.

In this post, the legal team at DeShon Laraye Pullen PLC describes an overview of spousal abandonment divorce proceedings in Arizona and the steps you can take to serve your petition. While the information presented below is general, you can speak with an Arizona divorce lawyer for situation-specific advice.

Establishing the Grounds for Divorce

Arizona courts require you to provide a valid reason for seeking a divorce from your partner. Fortunately, we are a no-fault divorce state, which means that you do not need to plead your case beyond the marriage being irretrievably broken.

Therefore, spousal abandonment is reason enough for filing a dissolution of marriage. You must also wait out at least one year after abandonment before submitting your application.

The Arizona Divorce Process When You Cannot Locate Your Spouse

Even though you cannot locate your spouse, you must still follow the typical divorce procedure by filing in the Superior Court in your county of residence.

In most divorce cases, including spousal abandonment, there are three necessary steps to follow:

1. File your petition for a Dissolution of Marriage in your residential county
2. Serve the petition in a manner consistent with an unlocatable spouse
3. Attend court hearings to pursue a Decree of the Dissolution of Marriage

As you can see, it is a straightforward process for any divorce. However, when the action involves children, it becomes a more complex procedure.

It is helpful to talk with an Arizona divorce lawyer for this situation. He or she can help you make decisions that are in the best interest of your minor dependents.

Serving Divorce Papers to an Unlocatable Spouse

Serving divorce papers in Arizona must occur even when you cannot find your spouse. Typically, most divorces serve documents by mail or hand-deliver them via a process server. In the case of an unlocatable spouse, you will use a substituted methodology.

With that said, you must first exhaust every opportunity to reasonably locate him or her before using a substituted service. This concept gives rise to hiring a process server to “skip trace” him or her.

Skip tracing is a method of using a person’s personal information compared against state, federal, and individual credit databases. If the process server uncovers your estranged spouse’s location, then service resumes as usual.

However, if he or she is still unlocatable, then you will serve your spouse via publication. Service by publication occurs where you post the petition in locally distributed newspapers. An Arizona divorce lawyer can help you execute this aspect properly.

Contact an Arizona Divorce Lawyer at DeShon Laraye Pullen PLC for an Initial Consultation

Dealing with divorce is upsetting enough without adding abandonment to your injury. You do not have to face this situation alone.

At DeShon Laraye Pullen PLC, we understand the impact that this situation has on your life. Our team of Arizona divorce lawyers is here to help you at every critical point of the divorce process.

You can schedule an initial consultation with our team of legal professionals by calling 602-252-1968 or completing our contact request form.

In Arizona, the family courts make a provision for separating and divorcing couples to settle some of the terms of their arrangements in private. If both parties can agree on issues such as child support, visitation and the division of assets, they can create and sign a rule 69 agreement. By having this agreement in place, both soon-to-be former spouses can concentrate on the unresolved issues in court and leave the agreed-upon matters alone.

The rule 69 agreement was created to make family law cases easier to handle. If divorcing couples can resolve some of their concerns before the court date, they can save the judge, and everyone else involved, a lot of time. If used correctly, a rule 69 agreement can reduce much of the stress of a separation or divorce. It can be abused by either party, however, which is why Arizona law has set parameters for rule 69 agreements.

Rules and Legalities of the Agreement

Rule 69 agreements are legally binding contracts. Once entered by the judge, they are difficult to modify. Because of this, rule 69 agreements must meet at least one of these criteria:
• A written document, preferably signed by both parties;
• Read for the record in court;
• Recorded by audio in the presence of settlement conference officer or a court-appointed mediator.

If either party meets one of these requirements, it’s difficult for the other to assert that they did not consent to the arrangement. It is possible to discredit a rule 69 agreement in Arizona, however, provided the challenging party can prove that something is wrong with it.

Fighting a Rule 69 Agreement

As mentioned above, it’s not easy to back out of a rule 69 agreement after it is provided to the court and approved by the judge. Once these contracts are submitted, they’re considered a court-ordered arrangement. You may be able to nullify the rule 69 agreement, however, if you can prove one of the following:
• You weren’t present when the document was created and signed;
• You were forced into agreeing to the arrangements under duress;
• The terms outlined in the agreement are not fair to you or in the best interests of your child(ren).

Bear in mind that if you don’t win your case, you can be ordered to pay your spouse’s attorney fees. It’s better to challenge the agreement only if you have unshakeable evidence that it isn’t valid or that it violates someone’s rights.

The Bottom Line

Rule 69 agreements are only meant to help couples who are separating and divorcing work together to create a plan that benefits everyone. Divorce mediation is available to help couples collaborate on final decisions. Once they present an agreement to the court, the judge will ask both parties if it was entirely mutual, if either of them agreed to the arrangements under duress and if both parties believe the terms stated are in the best interests of everyone involved, particularly the children. In other words, the judge will give both sides every opportunity to speak up if they don’t feel good about the agreement.

Call DeShon Laraye & Pullen PLC today if you have any further questions about Arizona’s rule 69 agreement.

At DeShon Laraye & Pullen PLC, we know how to navigate the complexities that surround Arizona’s rule 69 agreement skillfully. You can schedule a meeting with our team by calling 602-252-1968 or sending us a message via our online request form.

As Phoenix divorce attorneys, we are often asked whether it’s better to be the one to file for divorce or the one to be served. From a legal standpoint, there is no implication or consequence of being the first to file for divorce.

It does not show to the courts that you are the aggressor or the one who decided to bail on the marriage. Sometimes, a spouse becomes the filer simply because he or she can better afford the filing fees, whether he or she wanted it or not.

However, there are definitely advantages and disadvantages from a logistical perspective, and we are going to cover those more specifically in this article.

If you are going through the process of considering an Arizona divorce, it is advantageous to retain the legal counsel of an experienced Phoenix divorce attorney at DeShon Laraye Pullen, PLC. We can help you navigating the complexities of filing and serving your petition as well as helping you through it all over the long-run time horizon. Contact our office for an initial case view by calling (602) 252-1968.

Be Aware that Every Case Is Unique

While the information presented below is purely informational in nature, it can help you weigh the advantages and disadvantages of being the first party to file for divorce. Keep in mind that only the direct application of the law by a licensed Arizona attorney is the best way to determine your options.

Pros and Cons of Filing for Divorce First in Arizona

The advantages of filing for divorce first are marginal from a general standpoint. However, benefits do exist for specific situations. For starters, you aren’t ‘caught off guard’ by being on the receiving end of divorce papers.

Advantages of filing for divorce first include:

• Establishing the administrative expectation of the case including court dates and choice of venue
• The ability to plan for the divorce beforehand by carefully considering your options and possibly speaking with an Arizona family law attorney
• A sense of relief since the plug has been pulled on the marriage and you were the one to initiate it
• Deciding when the date of marital asset acquisition periods end by filing
• Being the first to speak in court since you are the named petitioner and your spouse is the respondent

On the other hand, a few simple disadvantages exist when it comes to being the first filer. However, to truly gauge the effects, it really depends on your unique situation and the nature of your relationship with your ex.

Disadvantages of filing for divorce include:

• Suddenly alerting your ex to the assets and custody arrangement of which your eyes are set
• Paying higher filing fees and court costs since they are generally offered by the petitioning spouse
• Making it difficult to go back on your word if you later change your position on the matter of divorce

Again, the court does not treat the spouse who filed for divorce any differently. The circumstances surrounding the filing may come into question, but courts can not legally hold your right to terminate a marriage contract against you.

Your only requirement is to devise a strategy that protects your remaining assets, any shared children, and complies with Arizona law.

Hire a Phoenix Divorce Lawyer to Help you File in Arizona

As you can see, there are many thoughts and considerations when it comes to answering the question of who should file for divorce first in Arizona.

The best way to ensure that your interests and family stay protected is by hiring the experienced legal counsel of a licensed Arizona family law attorney. He or she can help you through the initial filing process while managing your case until the decree is finalized.

Consider Working with DeShon Laraye Pullen PLC

At Deshon Laraye Pullen PLC, we know how painful the divorce process is. But we also know that you need a strong advocate to pull you through the process and become stronger over the long-run. Plus, we’ll ensure that we handle your divorce following your values and your family’s best interest.

You can schedule an initial consultation with a Phoenix divorce lawyer team member today by calling (602) 252-1968 or by sending us a message regarding the details of your divorce through our online contact form.

Even the most cordial of exes can experience stress during a divorce. There are particular connotations that come along with the word, including time, money, and custody issues. While you can’t ever really ‘prepare’ for divorce before it happens, there are a few actions that you can take to ensure that your interests are protected.

If you are facing a divorce, you may want to retain the legal counsel of an experienced Phoenix divorce lawyer at DeShon Laraye Pullen, PLC. Our legal care team can assist you in navigating the complexities of the divorce process as well as help you avoid detrimental mistakes. Contact us for your initial consultation by calling (602) 252-1968 or sending us a message via our online form.

As you continue your search for information and weigh your options, here are our top tips when it comes to avoiding common mistakes that people make during divorce. While the article below is purely informational, you should always direct your specific questions to a licensed Arizona attorney.

Mistake # 1: You Waited Too Long to File for Divorce

Ending a marriage is not a decision that one should make lightly. However, if we are being real, there is a point-of-no-return that every couple hits when they know it’s over. Unfortunately, things are comfortable, and if kids are involved, most people don’t want to rock the boat of a ‘well-adjusted life.’

The truth is that suffering through marriage is not a well-adjusted way of life. Resentments build, debts mount, and assets grow. The longer that couples delay the inevitable, the more complicated the divorce proceedings can become.

Mistake # 2. You Discussed Your Divorce via Social Media

We preach total abstinence from social media during divorce proceedings in Arizona. However, that isn’t doable or advisable for everyone. So, if you must remain ‘social’ while going through a divorce, the least you should do is never mention the details of your case online.

No good can come of bad-mouthing your ex or showing off the excessive amounts of money you are spending.

Before hitting the ‘post’ or ‘send’ button, think about how your words could come back to haunt you. These days, people who say they are your friends may not actually mean it. And they might even prove this assertion by screenshotting and sharing something you thought was utterly private.

Your written words are admissible as evidence. Resist the urge to put your opinions in writing, please.

Mistake # 3: You Tried to Conceal Shared Marital Assets

Arizona statutes require both spouses to disclose their marital and non-marital assets in their entirety. Some parties get a little too smart and attempt to transfer ownership of property and investments to avoid their disclosure in court.

This is a mythical loophole that does not work. You can be confident your soon-to-be-ex will mention your expensive car or large bank account you didn’t include in your financial disclosure forms. Leave your assets in your name and add them to your list instead of trying to cover them up.

Mistake # 4: You Forgot to Make Changes to Your Estate Planning Documents

A divorce doesn’t necessarily negate the language in place on your estate plan. An estate plan typically includes your last will and testament, health and financial directives, powers of attorney, and living trust. These are pretty sensitive documents that impact the future financial wealth of you and your family.

Plus, you should update these items so that your ex isn’t in charge of determining whether or not you should remain on life support.

Mistake # 5: You Didn’t Discuss Your Options with a Phoenix Divorce Lawyer

There are several missteps and pitfalls that one can take during a divorce. The consequences of which can affect several aspects regarding the outcome of your case. Whether you are a more economically stable spouse or not, there is more at stake than money and property. Divorcing couples must mitigate the stress of the process using a level head and retaining their own right to counsel.

Hiring a divorce attorney during an Arizona divorce case does not have to be a contentious thing. It’s a civil right afforded to both parties. When each party retains his or her separate counsel, there is a certain level of comfort in knowing that both of your rights are being protected.

There are checks and balances at this point. In short, you are hiring certainty that you, your ex, and the entire legal system is managing your case from a big-picture perspective.

Consider Hiring a Phoenix Divorce Lawyer at DeShon Laraye Pullen, PLC

You do not have to face the Arizona divorce process alone. Hire a Phoenix divorce lawyer that is going to provide you with due care that best represents your needs. You can reach the DeShon Laraye Pullen, PLC, office to arrange for an initial consultation by calling (602) 252-1968 or sending us a message via our contact form.