In today's world, many people find themselves a party to a transaction in which a guarantor is required. If you are planning to use a guaranty to secure your financial investment in Arizona, you need to be aware of a couple of things.
First, Arizona is a community property state, meaning that any property acquired during the marriage, other than a gift or inheritance if kept separate, is property of the community. Even if one spouse earns all the money to acquire the property, all the property acquired is considered to be community property, including the income. Any property acquired prior to the marriage is considered that individual’s separate property, if kept separate from the community assets.
Second, in Arizona a guaranty cannot be enforced against the martial community unless both spouses sign the guaranty. Although either spouse separately may acquire, manage, control or dispose of community property or bind the community, the joinder of both spouses is required in any transaction of guaranty, indemnity or suretyship. Of course, this is contingent upon the guaranty being executed while the guarantor is married.
Accordingly, community property is off limits to the holder of a guaranty in the event that the guaranty is enforced. In fact, not even the guarantor’s share of the community property will be subject to the guaranty. Thus, the guaranty is limited to the guarantor’s separate property. Unfortunately, most people bring very little, in the way of assets, into a marriage and the separate property generally consists of an old pair of skis, a baseball glove, and a closet full of old tennis shoes. The purpose of the law is to protect both spouses’ interest in the community property.
Despite the harshness of the rule as applied to the unsuspecting holder of a guaranty, there are some obvious precautions that, if taken, will increase the effectiveness of a guaranty. Always check to see if an individual guarantor is married, and if so, require both spouses to sign the guaranty. Another worthwhile precaution is to have the individual guarantor and their spouse sign the guaranty in the presence of a notary.
Moreover, you might require the guarantor to provide evidence of his/her separate property to ensure the effectiveness of the guaranty.
Remember, the title of the document is not what makes a guaranty, if the guarantor's property is not subject to the guaranty, it may not be worth the paper on which it is printed.
Regardless of what you do, you might also consider involving an attorney. There are many different factors to consider when executing any kind of legal document. Unlike a form that can be purchased and downloaded off the internet, an attorney can help you identify and protect your interests in a proactive manner.
If you have any questions concerning contracts please call Rowley Chapman Barney & Buntrock at (480) 833-1113 and ask for Jordan Rolfe
