Divorce

The goal of a divorce is to end a marriage and resolve such issues as child custody, visitation, child support, spousal maintenance (alimony), property and debt division and attorney's fees and costs.  A divorce decree (final judgment) can be based on an agreement between the parties or result from a trial. An agreement is usually less traumatic for you and your children and far less expensive than a trial. Ultimately, most cases are resolved without a trial.

The Divorce Process

The Petition

A divorce begins with the filing of a Petition for Dissolution. This document notifies the court and your spouse that you want to end your marriage. It also lists what you are asking for, such as child custody, child visitation, child support, spousal maintenance (alimony), property division, attorney's fees and costs. 

The Petition must be served on your spouse.  The date the petition is served is the date the community nature of your marriage ends. This means that once the Petition is served, the community will no longer exist for purposes of debt and asset acquisition.  Any debt incurred by either of you will be your sole and separate debt unless the Court orders otherwise.  Any asset acquired as a result of his or her earnings becomes that person's sole and separate property.  Therefore, it is important to open a new bank account into which you deposit any income received after service of the Petition.  Be sure that the first pay check you deposit into the separate account is payment for work performed after the date of service or you may commingle your separate income with the community income.

The Waiting Period

By law, there is a 60 day waiting period from the date of service until a marriage can be legally dissolved.  This is true even if the parties are in complete agreement.  The Legislature mandated this waiting period in the hopes that couples will reconsider and choose to stay married.  The day of service is the first day of this 60 day waiting period.

The Response

After a Petition is served, the other spouse (Respondent) is entitled to file an opposition to the orders requested, otherwise known as a response. In Arizona, a Respondent must file a response to the Petition for Dissolution within 20 days if (s)he lives in state or 30 days if (s)he lives out of state.  Failure to file a timely response will result in the loss of the ability to contest the relief requested in the Petition and the court might give the requesting spouse (Petitioner) everything asked for in the Petition through a default divorce.

Temporary (pendente lite) Orders

While a case is pending final orders, either party may request temporary orders from the court.  These case-specific rules may address such issues as child support, custody, parental access, spousal maintenance, payment of debts, use of the marital residence, etc. The temporary orders are only valid until the court finalizes the divorce.

Default Judgment

If the Respondent does not file an objection to the Petition for Dissolution, the Petitioner is deemed to have “won” by default and the orders requested in the Petition will be granted by the court.

Discovery

If the opposing party does file a response, then everything must be agreed to or litigated at trial before the parties can be divorced.

Prior to or during settlement negotiations, but before trial, each spouse is entitled to receive information about the other, such as income and the identity of all assets and debts known to the party.  This process is called discovery.  Oftentimes the depth of discovery depends upon the size and value of the estate and the length of the marriage.

There are several different discovery procedures available to the parties.  For example, a list of questions known as interrogatories, which require a formal written answer to each question within a stated time limit, may be sent to the other party.   Deposition of witnesses and subpoenas may also be used to discover information about the other spouse.

Negotiated Settlement

Most lawyers and judges agree that it is better to resolve a case by agreement than to have a trial in which a judge decides the outcome. A negotiated settlement gives the parties privacy and control as compared to a trial.  Although your lawyer may recommend that you accept or reject a particular settlement proposal, the decision to settle is yours. Your lawyer cannot and will not make that decision for you.

Even if the parties cannot come to an agreement on everything, it is important to submit  a partially negotiated settlement.  For example, Jane and Jeff agree how to divide all their assets, but their house.  They also agree on legal and physical custody of their minor child, but not on Jeff's parenting time.  To minimize their expenses at trial, Jane and Jeff should sign a parenting agreement as to custody, but reserve the issue of parenting time for trial.  They should also sign a property agreement which documents all their agreements regarding property and debt division, but reserves the issue of the marital residence for trial.  By doing this, Jane and Jeff have drastically reduced the issues to be decided by the court.  They have simplified their litigation by identifying specific issues to be addressed and their lawyer's trial preparation time will be shorter; as will the trial itself.

Trial

Any unresolved issues between the parties must be litigated at trial before the divorce can be granted.  Trial is risky, expensive and unpleasant. During trial, each party explains his or her respective position to the judge. It is explained through witness testimony and documents called exhibits. No lawyer can predict the outcome of a trial because every case is different. It is rarely a good idea to allow a judge, who probably has a viewpoint, temperament and values very different from the parties, to tell a couple how to reorder their lives, divide their income and assets, and dictate when each parent may see his or her children.

Additionally, a trial does not necessarily mean the case is over.  Each party may, within a limited time, appeal to a higher court. An appeal adds more time and expense to the divorce process and is hard to win.

Enforcement of Your Decree of Dissolution

If a party fails to comply with the terms and conditions of the Decree, the court can be petitioned to enforce those terms.  After a hearing, the judge can put the person in jail or impose a fine as necessary to make the person obey the order.  If the party is not paying as ordered, a wage assignment can be put in place.

Children and Divorce

Ordinarily, parents make decisions about their children together, but when parents divorce, the hostility between them often interferes with what is in the best interest of the children. The behavior of parents before and after divorce has a tremendous influence on the emotional adjustment of their children. Keep these guidelines in mind:

1. Assure your children they are not to blame for the breakup and are not being rejected or abandoned by either parent.  Make sure they understand that they are still loved by both parents
2. Never make negative comments about your spouse in front of the child. Your children need to respect both parents
3. Do not use your child as a courier service to deliver messages, money or information.  Speak directly to the other parent
4. Do not discuss the court proceedings with the child
5. Do not ask your child questions about the other parent.  The court will generally consider this to be spying
6. Do not bring your children to court or to your lawyer's office
7. Avoid arguments or confrontations with the other parent while dropping off or picking up the children or at other times when your children are present
8. Do not listen in on your children's phone calls with the other parent
9. If you have an alcohol or drug problem, seek treatment right away.  The courts will not penalize you for recognizing a problem and getting help
10. If you are the custodial parent and the other parent is not paying child support as ordered, do not tell your children

For a discussion on child support or child custody, please visit those specific pages.

Medical Insurance and Divorce

After service of the Petition, you cannot be removed from the other party's insurance policy until further order of the court.  Once the Decree of Dissolution is signed by the court and you rely on your spouse for health insurance, you will be required to obtain your own coverage.  If you carry insurance for your spouse, you are permitted to drop him or her from your policy.  For the uninsured former spouse, COBRA coverage may be available if he or she was previously covered by his or her spouse's plan.  If COBRA is available, you are guaranteed health insurance for the same premium for 36 months.  After that time he or she must acquire an individual policy.

Considerations if You Own Real Estate

If you and your spouse own a home, there are several things to be considered before deciding how to dispose of the property.

The easiest solution may be to sell the house and split the equity.  Many couples choose this option when neither spouse wants the house or cannot afford the mortgage(s) on the home.  In this case, equity generally means the fair market value of the home minus the pay off amounts of any mortgage(s), the realtor and closing costs and any community debt, such as credit cards.

If one party wants to keep the house, she must buy out her spouse.  It will also require that the person keeping the home refinance the mortgage into her name alone.  The person keeping the home is not usually permitted to simply assume the existing mortgage because the ex-spouse will still be financially responsible for the loan.  The spouse being bought out of the residence is entitled to one-half the equity in the home.  Valuations can get messy as couples often disagree over both home values and their respective shares.

If you transfer a home to your spouse as part of the divorce settlement, you generally have no gain or loss to report for tax purposes.  This is true even if you receive cash or other consideration for the home.  This transfer rule does not apply if your spouse or former spouse is a nonresident alien. In that case, you generally will have a gain or loss to report.

In rare occasions, couples may agree to do nothing.  The spouse moving out of the residence can agree to wait a certain number of years before the house is sold.  This often coincides with the emancipation of the youngest child.  This arrangement, however, is fraught with complications.  For example, who pays for any major repairs?  Most lawyers advise against entering into this kind of agreement.

Hypothetical Costs Associated with Future Sale of the Property Cannot Be Deducted From the Equity.

It is generally considered inequitable to reduce one party's share of the community property by anticipated costs that are not expected to be incurred in the near future. Accordingly, hypothetical costs associated with the sale of property cannot be deducted from the share of the equity awarded to the spouse not receiving the property. In the absence of evidence that a sale is likely to occur in the near future, it is speculative to allow a deduction of the costs of a hypothetical sale from the share of the equity awarded to the spouse not receiving the property. The expenses of a future sale of an asset are uncertain in both occurrence and amount. For example, the property owner may die and thus never sell the asset. In any event, even if the sale does take place in the future, unless the sale is imminent, there is no reasonable basis upon which to predict the amount of expense related to the sale.

Even if the evidence demonstrates that a sale of the property is imminent, there must be competent evidence upon which a finding can be made of the anticipated costs of the sale. If the trial court has not ordered that the property be sold and the evidence does not demonstrate that a sale is imminent, the anticipated costs of sale generally should not be deducted from the parties' shares of community equity.

Calculating the Community Interest in a Pre-Owned Marital Residence

If a spouse owed a home prior to the marriage and there was a mortgage on the property at the time of the marriage, the courts have developed a formula for apportioning the value of the home to determine the spouse's separate interest and the community interest of the home's increase in equity during the marriage. The calculation is different for cases in which the mortgage still exists on the property and for which the mortgage was paid off during the marriage.  It does not matter which spouse wrote the mortgage checks each month because earnings by either party during the marriage are community property.

Sale of Jointly-Owned Property

If you and your spouse sell jointly owned property, such as a house, each of you must report your share of the recognized gain or loss on your income tax return for the year of the sale.

Social Security Benefits

Social Security bears many characteristics of a pension and would ordinarily be considered community property under state law principles. Federal law, however, prohibits such benefits from being subject to "execution, levy, attachment, garnishment, or other legal process" and declares that they are not "transferable or assignable." 42 U.S.C. § 407(a). This provision has generally been interpreted to prevent Social Security from being divided by state courts at divorce and Arizona views Social Security as the separate property of the participating spouse and no offsetting award is allowed.  Luna v. Luna, 125 Ariz. 120, 608 P.2d 57 (Ariz. App., 1979).

Although a spouse cannot obtain any portion of her husband's Social Security benefits, (s)he may receive Social Security benefits based either upon his or her own contributions or possibly as an ex-spouse of a contributor. 

If a divorced spouse was married for 10 years or more, (s)he can collect either 50% of the value of the ex-spouse's benefit, or 100%  of his or her own benefit, whichever is greater. The divorced spouse must be at least 62 years of age, unmarried, and must have been divorced for at least two years before he or she can start collecting from the contributing ex-spouse, unless the ex-spouse is at least 62 years old and already receiving benefits. There is no reduction in benefits for the primary contributor even though the ex-spouse receives the value of a percentage of his or her benefits.

If the divorced spouse remarries, he or she is no longer eligible for a percentage of the benefits from the previous ex-spouse. If the remarriage terminates, the divorced spouse once again becomes eligible for benefits from the previous ex-spouse.

If the contributing spouse is deceased, the surviving ex-spouse can collect benefits at age 60 as long as he or she has not remarried.

Retirement Plans

What is a Qualified Domestic Relations Order (QDRO)?

Qualified Domestic Relations Order, pronounced quad-row, is a specific type of domestic relations order that recognizes the right of an alternate payee to receive all or part of a pension plan which belongs to another person.  Typically, the Order assigns some or all a participant's pension benefits to a spouse, former spouse, child, or other dependent to satisfy family support or marital property obligations.  QDROs often are used when one party has a large pension or 401K and other assets of the community are insufficient to equalize the distribution of property between the parties.

Technical Requirements for QDRO's

Per Internal Revenue Code Section 414(p), a QDRO must meet all the following requirements:

1. It must provide for child support, alimony payments or marital property rights for a spouse, former spouse, child or other dependent of a qualified plan participant and it must be made pursuant to a state domestic relations law including a community property law
2. It must create or recognize the existence of the right of the alternate payee to receive all or a portion of a participant's benefits under a qualified retirement plan

A QDRO must specify the following:

1. The name and last known mailing address of the participant and each alternate payee covered by the order
2. The amount or percentage of the participant's benefits to be paid by the plan to each to each alternative payee (or the manner in which the amount or percentage is to be determined)
3. The number of payments or periods to which the order relates; and
4. Each qualified retirement plan to which the order applies

To be a QDRO, an order must not:

1. Include a requirement to provide for a benefit, or any option, not otherwise provided under the plan's document
2. Require a plan to provide for increased benefits; or
3. Include a requirement to pay benefits that are required to be paid to another alternate payee under another order

When is a QDRO Necessary?

The question of when you do need a QDRO and the question of how to a draft a QDRO when one is needed are often made on a plan-by-plan basis. One reason for the complexity is that the Internal Revenue Code allows both employers and individuals to establish retirement accounts. Employer accounts and individual retirement accounts are generally handled differently.

There a few basic pointers that should put you on the right path. First, a QDRO is usually necessary for an employer-sponsored arrangement. Generally, these types of arrangements include profit sharing plans, 401(k) plans, pension plans, deferred compensation plans under §457 and tax-deferred annuities under §403(b). If your employer is making contributions to the plan or if your employer is deferring compensation from your pay to put in the plan, the general rule is that a QDRO is needed.

There is one significant exception to this general rule. Certain small employers will have a Simplified Employee Pension Plan ("SEP"). In a SEP arrangement, the employer makes contributions to an individual retirement account ("IRA"). No QDRO is needed for this IRA even though it is receiving contributions from the employer.

Second, individual retirement accounts do not need a QDRO. IRAs include accounts that have been receiving your annual contributions and accounts holding rollovers from an employer-sponsored plan. For example, if you were participating in a 401(k) plan and terminated employment, you may have received a distribution from that 401(k) plan. You may have rolled the distribution into a IRA, or the 401(k) plan may have made a direct distribution to the IRA on your behalf. In either case, the money is now in an IRA rather than an employer-sponsored plan. A QDRO is not necessary for the IRA.

Tax Results when a QDRO is properly executed

If the receiving spouse elects to access the funds immediately, (s)he is taxed on the funds withdrawn from the retirement plan account, but the 10% early distribution penalty tax does not apply. 

If the receiving spouse elects to roll the funds over into an Individual Retirement Account, there are no tax consequences unless the funds are withdrawn early.   The rollover must be done within 60 days of the spouse's receipt of the QDRO distribution.

To avoid the twenty 20% federal income tax withholding that will be taken out of a QDRO distribution, the spouse should have the transfer made directly to the trustee of the IRA from the trustee of the qualified plan. 

A QDRO is Not Necessary for IRA Funds?

QDROs are not needed to transfer IRAs from one spouse to another spouse. Funds from one spouse's IRA can be rolled over tax-free into an IRA set up by the other spouse as long as the settlement agreement specifies it. To be safe, the settlement agreement should clearly specify that the transfer of IRA funds is required as part of the property settlement that is intended to be tax-free under Internal Revenue Code Section 408(d)(6).  If the receiving spouse chooses to withdraw the funds prior to age 59 and six months, (s)he may be subject to a 10% early withdrawal penalty in addition to income tax. 

Calculating the Community Interest in a Retirement Plan

Since pensions are a form of deferred compensation for services rendered, the portion of a retirement plan earned during marriage may be divided as community property, even though it is not received until after dissolution of the relationship. The community interest in any retirement account is determined by the following calculation:

Number of month the parties were married ) Number of months the spouse paid into the retirement plan.

For example, John and Mary married in January of 2000. A petition for dissolution was filed in June of 2007.  John was hired by Tucson Electric Power in March of 2000 and began paying into his retirement plan that same month.  Mary was hired by Raytheon in June of 1995 and left her position in January of 2005.

John and Mary were married for seven and a half years or 90 months. 

John started to contribute to his retirement plan AFTER the couple married, so Mary has a 50% interest in John's retirement plan.

Mary, however, contributed pre-marital income to her retirement plan; therefore, she has a separate property interest in that plan.  The community interest must be determined by using the formula above.  Mary contributed to her plan for nine years and six months, or 114 months.

The community interest = 90 ÷ 114 = .79; therefore, 79% of Mary's pension is community property.  John is entitled to one-half of the community interest or .39 (39%) of Mary's retirement.

Military Retirement

Eligibility for Military Retirement

Regular active duty members of the military service qualify for a monthly pension after 20 years of service regardless of age. There is no vesting schedule for a military pension. Generally speaking, a person cannot receive a military pension unless they have served the entire 20 years.  A person who has served for 20 years can start collecting a pension regardless of his or her age.

Military reserve members earn pensions but cannot be paid until they reach the age of 60. The value of the reserve pension is based on the Point System. A reservist receives one point credit for each day of service. He or she also has to have at least 20 years of service, but a year could consist of as little as 3 weeks in the summer and one weekend per month each year.

If the military member is disabled, (s)he will be eligible for disability pay. If the military member is terminated involuntarily due to a reduction in force, (s)he will be eligible for a lump-sum payment, the size of which depends on the number of years served. If the military member is voluntarily terminated because of a reduction in force, (s)he  will receive an annuity for a number of years, again depending on the number of years served on active duty.

Uniformed Services Former Spouses Protection Act of 1982 (USFSPA)

The USFSPA allows a state divorce court to award a share of a member's pay as marital property.  In Arizona, a portion of the military spouse's retirement pay will be considered the community property and the non-military spouse will be entitled to one-half of the community's portion. The portion will generally be based on the number of years of marriage during which the retirement pay was earned, divided by the total years of service. If the spouses were married for at least ten years while the member was on active duty, the non-military spouse will qualify for direct enforcement, which means that his or her portion of the retirement pay will be paid to him or her directly by the military finance office.

The 10 Year Rule

In order to divide a military pension as marital property, there must be at least 10 years of marriage coincident with at least 10 years of military service (active or reserve). In a case where there is no 10 year period of overlap of marriage and military service, the pension cannot be awarded as marital property. However, there is no such time requirement if the pension is being divided to satisfy spousal maintenance or child support. In such a situation, the decree of divorce or settlement agreement should not refer to the military pension as property.

Military Retirement and Social Security

If the 10 Year Rule has been satisfied, military retirement is divisible as community property.  However, if one spouse was enrolled in the Civil Service Retirement System (CSRS), which precludes participation in Social Security, and the other spouse participated in Social Security, it is inequitable to award one spouse his or her Social Security, but require the other spouse to divide his or her CSCR as a community asset.

Relying on this concept of fairness, the Arizona courts agree that to the extent individuals with Social Security benefits enjoy an exemption of that 'asset' from equitable distribution, those individuals participating in the CSRS must be similarly positioned.  In these cases, a present value, measured as of the date of dissolution, should be placed on the Social Security benefits the spouse would have received had (s)he participated in that system during the marriage. This necessarily will require a reconstruction of his or her wages. The Social Security calculation can then be deducted from the present value of the spouse's CSRS pension on the date of dissolution. The remainder, if any, is what may be divided as community property.

Medical, Commissary and Exchange Privileges

Full medical, commissary and exchange privileges are available to an ex-spouse if the military member served 20 years and the spouses were married for 20 years while the member was on active duty. If the military member served 20 years and the spouses were married for 20 years, but the member was on active duty only 15 to 19 of those years during the marriage, the ex-spouse will be entitled only to medical care for a limited time. After that limited time, the spouse will have 90 days to enroll in a group health plan established by the Department of Defense. If he or she remarries, all privileges are lost. A divorced spouse is not entitled to medical, commissary, or exchange privileges if the marriage lasted less than 20 years or the military spouse served fewer than 20 years.

Former Spouse Survivor Benefit Plan

The Survivor Benefit Plan is a plan whereby a portion of a military retiree's pay is paid to a named beneficiary. Without this plan, all retirement pay would stop at the death of the retired military member. The maximum amount of coverage is for 55% of the member's gross retired pay.

A spouse generally loses eligibility for the SBP upon divorce; however, the divorced spouse may receive a survivorship annuity if "former spouse coverage" is elected by the military member. When coverage is ordered by a court, and the member then fails or refuses to make the required election, that member shall be deemed to have made such an election if the service finance center receives a written request from the former spouse asking that the election be made.

If the former spouse remarries before the age of 55, coverage is suspended. If the subsequent marriage is terminated by death or divorce, coverage is resumed. As long as the former spouse is alive, the member may not name a current spouse as a beneficiary unless the former spouse waives the benefit in writing.

The Disability Issue

Military retired pay can be divided under a Military Court Order (MCO), which is the military's version of a QDRO.  A former spouse can receive no more than 50% of the member's disposable retired pay.

The law allows only disposable military retired pay to be divided. Disposable pay is defined as military retired pay after the following deductions:

1. Debts owed the U.S. government;
2. Amount of retired pay waived for receipt of disability compensation from the Veterans Affairs Department;
3. National Service Life Insurance premiums; and/or
4. Survivor benefit premiums for a former spouse receiving payments under USFSPA

A veteran may receive anywhere from 10% to 100% of her retired pay in the form of disability pay.  Although the injury must have occurred in the line of duty, the disability waiver can come later, and, in some cases, after the divorce, reducing the amount of property available for equitable distribution.

Veterans have a dual incentive for receiving as much retired pay in the form of disability as possible. Not only is it non-divisible in the case of divorce, but V.A. disability compensation is not counted as taxable income by the federal government. When the disability waiver comes after divorce, reducing the share available to the former spouse, it can have an unfair effect on the former spouse.

Courts have addressed this issue by allowing the affected spouse to petition for restoration of her monthly payments from her husband's military retirement.  Courts have not hesitated to reclassify the retirement benefits as spousal maintenance and require the husband to continue making monthly payments to the wife despite the conversion of  his retirement pay to “non-divisible” disability.

Frequently Asked Questions

Should I File First?

The only benefit to filing first is if your case proceeds to trial.  As the Petitioner, you would present your case first and you have the opportunity to respond to your spouse's closing argument.  Otherwise, there is no difference between being the Petitioner or the Respondent.

What is the Preliminary Injunction?

In every divorce case, a preliminary injunction is issued against both parties.  You are not allowed to sell, transfer, encumber (take a loan against) or dissipate (waste) any joint assets except in the ordinary course of business or to pay your reasonable attorney's fees.  Joint assets may include property in just one person's name.  The injunction also prevents either of you from changing insurance coverage or the beneficiaries of insurance coverage; taking the children out of state without a court order or the other party's permission; or from harassing each other.  Violation of the preliminary injunction can result in a finding of contempt of court.

Can I date while my divorce is pending?

Since Arizona is a no-fault state, generally the court is not concerned with your private life. However, dating someone else may anger your spouse and impede settlement.

How long will my divorce take?

By law, you must wait at least 60 days before your divorce is final.  How far beyond the 60 days your case lasts depends on a number of things. Every divorce is different. Factors that can make a difference include the schedules of the parties, the lawyers and the court, the cooperation of witnesses, the volume of discovery, the speed of the appraisers, and the complexity of the case.

Can I drop my spouse from my insurance?

Once the Petition is served, you must maintain all life and health insurance policies in effect at the time.  You cannot change the beneficiaries of any insurance policy without permission of the court.  You cannot drop either your spouse or your children from your health insurance plan. No changes may be made to any insurance policy until the Decree of Dissolution has been accepted by the court.