Arizona is a community property state, which means, in general, that property acquired by either spouse during a marriage is presumed to belong to both spouses equally. The community property law affects not only how assets are divided during a divorce but also how they are treated upon the death of one of the spouses. In a previous post, we briefly reviewed Arizona community property transfers upon death. In this post we cover such transfers in greater detail.

The community property law applies only to married couples and only to assets acquired during the marriage. Property held by one spouse before the marriage is usually considered to be solely owned. Community property can include not only real estate but also cash, vehicles, business holdings, bank accounts, investment accounts, retirement accounts, pensions, wages and other liquid assets.

Although community property status is imposed by law, how an asset is treated after the death of a spouse depends on the terms of ownership. A married couple can own property in one of two ways:

• With right of survivorship — This means the deed or other title document provides that both spouses hold the property by the entirety. When one spouse dies, the surviving spouse takes full ownership of the property. This is useful for keeping the asset solely within the surviving spouse’s hands. Another benefit is that the asset does not go through probate, which saves time and money.
• Without right of survivorship — The law treats this scenario much differently. If one spouse dies, a one-half interest in the community property goes to the deceased spouse’s estate. It is then distributed to his or her legal heirs or to beneficiaries designated by will or by trust. The surviving spouse retains a one-half interest in the property, just as he or she would keep in a divorce.

The right of survivorship is plainly more beneficial for the surviving spouse but it works against leaving a share of community property to children or other heirs. Importantly, the right of survivorship must be expressly included in the asset’s ownership document to be effective.

Estate planning can be complicated and have far-reaching financial implications for everyone concerned. Our knowledgeable and experienced attorneys use wills, trusts and other legal methods to preserve and distribute assets in accord with our clients’ objectives.

People are moving to Arizona in great numbers, many with retirement in mind. Some wish to put their estate plans in place upon establishing residency. Also, a significant number of out-of-state residents are involved with will and trust administration matters in Arizona. Our attorneys are well equipped to serve such clients, offering flexible hours and virtual consultations.

Located in Mesa, the Law Firm of Joseph M. Udall, PLC provides skilled counsel for comprehensive Arizona estate planning and probate administration matters. Please feel free to contact us online or call (480) 500-1866 for an initial phone consultation.