How Community Property Laws Impact Will and Trust Planning

Arizona is a community property state, and as a result, married couples face unique rules when it comes to the ownership and inheritance of property. State residents are often uncertain about what this property legal status actually means and how it affects their estate planning. Understanding these rules is important to ensuring your wishes are carried out and your loved ones are cared for.

Arizona law generally presumes that assets acquired by either spouse during marriage are owned equally by both spouses. Community property rules mean that you can only give away your half of the community property in your will. Your spouse automatically retains their half, regardless of what your will says. This restriction often surprises newcomers to Arizona or those who assume they control the whole asset. If you attempt to leave more than your share, those wishes cannot be honored, and the resulting confusion can fuel disputes between a surviving spouse and children or other heirs.

Here are important things to consider in dealing with community property:

• Effects of commingling — Community property generally does not include assets that were owned before the marriage began, as well as those received individually through gift or inheritance. If you mix (“commingle”) separate property with community property, such as depositing an inheritance into a joint account, you may unintentionally convert separate assets into community property. This can affect who inherits what after a spouse’s death.
• Effects of dying intestate — If you die without a will or trust, Arizona’s intestacy laws decide who inherits your share of community property. The specifics can differ greatly depending on whether you have children outside your current marriage. Your surviving spouse might share your half with children, or receive all of it. Without clear documentation, the probate process becomes longer, more complicated and prone to family conflicts.
• Trusts can help you control your half of community property — A revocable living trust enables you to manage your half of community assets during your life and direct their distribution after death, which can help avoid probate and ensure privacy. For those with significant premarital or inherited assets, a separate property trust offers extra protection, preserving those assets as separate and shielding them from unintended conversion to community property. 
• Consequences for second marriages and blended families — Arizona’s community property laws can have the effect of disinheriting children from a prior relationship. Prenuptial or postnuptial agreements are important tools to clarify ownership and expectations. A trust can be tailored to support a surviving spouse but still protect inheritance rights for your children.

Consulting an Arizona estate planning attorney can be invaluable. Attorneys can help you distinguish between community and separate property, draft wills and trusts tailored to your intentions, and ensure your plan complies with Arizona law. 

Jeffrey P. Hall, PLLC, with offices in Phoenix, Peoria, and Chandler, assists people across Arizona in achieving their estate planning objectives. To schedule your free initial consultation, call me at 480-409-5174 or contact me online.