The Drahos Formula & How It Can Impact Property Division in Your Arizona Divorce

How Much Is Your Community Lien Worth When Divorcing In Arizona?

Back in the day, most people who got married did so at a younger age and ended up buying their first home together. Nowadays, it’s becoming more common for at least one spouse to have bought their own home before tying the knot. But with the prices of homes these days and the lengths of mortgages, either spouse could end up paying off a significant portion of the mortgage while married. Most income earned during a marriage is community property, which could make those payments contributions from the community property estate. Your preconceived notions about what you’re entitled to in a divorce could be far off from how a judge would actually rule. For more information about divorce in Arizona as well as information about what you can expect based on your specific circumstances, call 480-448-9800 to schedule your free consultation with one of our experienced Tucson divorce lawyers today.

Making a property division in an Arizona divorce

What is Community Property?

Community property is the method of property division used for divorces in Arizona. A.R.S. § 25-211 makes most property acquired during a marriage part of the marital estate in Arizona. Property acquired before the marriage and after a petition for legal separation or dissolution of marriage has been filed are categorized as separate property. Property acquired during the marriage by gift, device, or descent is also that spouse’s separate property.

Just because an asset is purchased or titled as separate property doesn’t mean that the community isn’t due a share of it upon divorce. For example, a husband may put a down payment on his house before getting married, making it his separate property. But if his wife uses her own money to remodel the kitchen or install a pool, she could be due a share based on the property’s increase in value. This is known as “commingling.” Community property contributions will need to be traced back to determine how much commingling has occurred. This is best done with the guidance of a seasoned Tempe divorce attorney.

What is a Disclaimer Deed?

A disclaimer deed can be used to title property as separate property in Arizona. They are commonly used if a married couple wants to buy a house, but only one spouse qualifies for mortgage financing. The lender may have the spouse who doesn’t qualify sign a disclaimer deed to indicate who bears full responsibility for the property. You can find an example of an Arizona disclaimer deed here. You should always discuss your situation with a lawyer before signing any type of marital agreement, including a disclaimer deed. This is so you can fully understand your rights and obligations under the law to be better able to protect your own interests.

What is a Community Lien?

A community lien is the equitable share the community property estate is due if there have been community property contributions to a separate property asset. A community lien belongs to both spouses equally and should therefore be divided evenly during property division. It is vital that community liens be calculated correctly, as property division orders are almost impossible to overturn. The standard way to calculate community property liens on separate property assets in Arizona divorces is known as the Drahos Formula.

The Drahos Formula

The formula used to calculate community liens on separate property in Arizona was set forth by the case Drahos v. Rens. This case involved a husband who put a down payment on a home the day before his wedding. The rest of the mortgage’s balance was paid using community property funds. This case ruled that the wife was due a percentage of the increase in the home’s value between their wedding and divorce. The calculation is as follows:

C + [ ( C / B ) x A ] = Community Lien

C = Community Property Contribution

B= Initial purchase price

A= Appreciation

Here’s an example of the Drahos formula in action. Let’s say a husband puts $50,000 down on a $250,000 home in the days leading up to his wedding. All mortgage payments are made using community property funds. The mortgage is paid off, and the home eventually increases to $500,000 in value before the couple decides they want a divorce. That would make the values as follows:

C= $200,000

B= $250,000

A= $250,000

200,000 + [ (200,000/250,000) x 250,000 ] = $400,000

This $400,000 is the community lien on the property, which should be divided between the couple. That means the wife would get $200,000, and the husband would get $200,000, plus his $100,000 separate property share. Of course, many situations are far less cut and dry than this one. Review your situation with an experienced divorce attorney before finalizing any Drahos calculations. If you’d like to speak with a member of our Arizona divorce team, call 480-448-9800 and let us know when would be most convenient for you.

Do We Have to Use the Drahos Formula?

Based on your specific circumstances, you may not find the Drahos formula to be a fair way to divide a separate property asset with community property contributions. A judge will apply the Drahos formula to split your property in court, but your divorce doesn’t necessarily need to make its way before a judge. The spouses are encouraged by the courts to reach a divorce agreement out of court, sparing court time and resources.

Reaching an out of court divorce agreement, or a consent decree, may be easier said than done. Some spouses treat their divorces as bitter feuds rather than dissolutions of marriages. But keen negotiation can help couples draft their own divorce agreement without ever going in front of the judge.

Reaching an agreement could require a great deal of compromise. If it’s more than either spouse is willing to bear, mediation could help the couples reach an agreement and avoid taking their divorce to trial. Not only does trial mean that the judge now has ultimate control over the case, but the spouses will also have to pay significantly more in court costs and attorney’s fees. Mediation is inappropriate if there has been domestic abuse between the spouses. However, mediation can be a powerful tool to help divorcing couples (and parties in almost any other type of matter) come to an agreement that is amenable to both parties. A mediator, or a neutral third-party negotiation overseer, may come up with ideas that the spouses had not even realized were possible. There are limitless opportunities when negotiating in a mediation session. You can either bring your attorney or represent yourself when attending a divorce mediation. If you are looking for representation in a divorce mediation or a Mesa divorce in general, call 480-448-9800 to schedule your free consultation with a member of our family law team.

Contact Our Arizona Divorce Team For Your Free Consultation

Having commingled separate property is just one of the infinite issues that could complicate your divorce situation. At AZ Family Law Lawyers, we understand that entering your divorce with incorrect assumptions or signing agreements based on misunderstandings of the law could be quite costly. That’s why it’s always recommended to seek out a case review with a qualified attorney before filing or signing anything.

 

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