Ordinarily, when a spouse acquires an asset before marriage or as an inheritance, the asset is that spouse’s sole and separate property. In Arizona, the other spouse generally has no claim to sole and separate assets.
There are a few ways that a spouse can acquire an interest in the other spouse’s separate property. One such way is when either person works during the marriage to improve the separate asset. In the 1979 case of In re the Marriage of Cockrill, the Arizona Supreme Court explained that in such situations, the community has a right to compensation for any labor either spouse engages in and growth that results from that labor. Thus if there is a separate asset, but one spouse works to improve it, the community must be compensated for the work.
As an example, imagine that a woman starts a business before marriage. That business is a separate asset. She gets married, and continues to work at cultivating the business for several years. The work she does and the growth in the value of the business that results from her work, belongs to the community. Thus if the woman and her husband divorce, the community can impose a lien against the business for the value of the work and growth.
Contrast this with a scenario where the separate asset grows passively. For example, had the woman purchased a stock portfolio that was a separate asset and did nothing with the stocks during marriage, any growth in the stocks would be a result of the nature of the stocks, not of the wife’s work. Thus the marital community would have no claim to the increase in stock equity.