It can very difficult for husbands and wives to contemplate what life might be like once their spouse passes away. Without careful planning, you might experience unnecessary stress during an emotionally difficult time. Fortunately, Arizona law gives married couples a legal option that allows them to take full ownership of shared assets outside the probate process while possibly gaining a tax benefit. 

This potential solution is known as Community Property with Right of Survivorship (CPWROS). The name refers to the state law declaring that assets acquired during marriage are owned jointly by both spouses.  If a particular asset is designated as CPWROS, that can simplify the transfer of assets when one spouse dies. Upon the death of a husband or wife, their spouse becomes full owner of the asset without having to wait until the estate is settled.   

While couples often own their homes jointly, it’s important to remember that various types of property, including bank accounts and investment assets, can also qualify as CPWROS. However, the asset’s title must include this designation and both spouses must agree to the arrangement. 

Along with probate avoidance, CPWROS offers a potential tax advantage. The law authorizes a “step up” in the basis of the asset when one spouse dies. This means that the property's value is adjusted to its fair market value at the time of death, which might reduce capital gains taxes if the surviving spouse decides to sell the property later.

While CPWROS offers numerous advantages, it may not be suitable for every couple. For example, if you wish to leave your share of the property to someone other than your spouse, this arrangement would not align with your goals. Additionally, a CPWROS designation does not protect assets from creditors or lawsuits.

Consulting with an experienced estate planning attorney will give you the information you need to determine whether classifying certain assets as CPWROS should be part of your overall strategy. The Law Firm of Joseph M. Udall, PLC in Mesa can look at your particular circumstances and explain how this option, as well as others, would fit your circumstances and objectives. Please call (480) 500-1866 or contact us online to schedule a consultation.