What the rule says
Arizona's community property with right of survivorship (CPRS), authorized under Ariz. Rev. Stat. § 33-431, is a distinctive Arizona estate planning tool. CPRS combines two features:
1. Community property characterization — both spouses are treated as joint owners of community property under Arizona law 2. Right of survivorship — at the death of either spouse, the property passes automatically to the surviving spouse without probate
The CPRS designation is created in the deed or other title document. Married Arizona couples can convert existing community property to CPRS, or hold newly acquired property as CPRS from the outset.
The key distinction from joint tenancy with right of survivorship: joint tenancy is a non-community-property form of co-ownership that loses community property tax advantages. CPRS preserves community property characterization while adding the survivorship feature.
What this means in practice
CPRS produces several distinctive Arizona outcomes:
Probate avoidance
When the first spouse dies, CPRS-titled property passes automatically to the surviving spouse outside probate. The surviving spouse establishes title through the death certificate plus the original deed, similar to a beneficiary designation. No personal representative, no court involvement, no probate fees.
Double step-up in basis preserved
Under federal Internal Revenue Code § 1014(b)(6), both halves of community property receive a step-up in basis at the death of either spouse — the community property double step-up. CPRS preserves this advantage because the property remains community property despite the survivorship feature.
A crucial difference from joint tenancy: property held in joint tenancy with right of survivorship between spouses generally only receives a step-up on the deceased spouse's half (under federal income tax rules treating joint tenancy as separate property). CPRS preserves the double step-up that pure community property would provide.
For a couple holding $1 million of appreciated stock with $200,000 basis: - Joint tenancy with right of survivorship: Surviving spouse takes the deceased spouse's half with $500,000 basis (stepped up); retains own half with $100,000 basis. New basis: $600,000. - CPRS: Both halves step up. Surviving spouse takes the entire $1 million with $1 million basis.
The $400,000 difference in basis can produce $80,000-$100,000 of tax savings if the property is later sold.
Compared to Washington's CPA
Arizona's CPRS is somewhat narrower than Washington's community property agreement (covered in wa_community_property_agreement):
- CPRS applies to specific titled property. The designation must be on each piece of property individually. - CPA applies to all spousal property. Washington's CPA converts all property to community property with automatic transfer. - Neither tool produces complex bypass trust planning. Both are designed for simple transfer to the surviving spouse.
Arizona has a different mix of estate planning tools than Washington. Arizona's tools include CPRS (asset-by-asset), beneficiary deeds for real property, and traditional revocable trusts for more complex planning.
Limitations
- Only between spouses. CPRS requires a married couple in a community property regime. - Limited to specific property. Each piece of property must have CPRS title. - No bypass trust planning. All property goes to the surviving spouse, potentially wasting the deceased spouse's federal estate tax exclusion (without portability election). - Property remains subject to creditors of either spouse during life.
How CPRS is created
For real property, the deed must contain CPRS language. A typical deed grants the property "to John Doe and Jane Doe, husband and wife, as community property with right of survivorship." The specific statutory language ensures the property is treated as CPRS rather than ordinary community property or joint tenancy.
For existing community property, spouses can record a new deed converting the property to CPRS. The conversion does not generally create gift tax or other tax consequences if done properly.
For financial accounts, account agreements with the financial institution must specify CPRS designation. Many AZ financial institutions support CPRS account titling.
Tax considerations
CPRS interacts with several tax frameworks:
- Step-up in basis at first death: Double step-up preserved. - Federal estate tax: Marital deduction applies; the deceased spouse's federal exclusion is not used (similar issue to WA's CPA). - No state estate tax in Arizona: AZ has no state estate tax, so federal-only planning applies. - Federal portability: Election can preserve the deceased spouse's federal exclusion even with CPRS transfer.
What you can do about it
For married Arizona residents:
- Consider CPRS for primary residence and major assets. The combination of probate avoidance and double step-up makes CPRS attractive for specific property categories. - Coordinate with overall estate planning. CPRS is one tool; comprehensive plans typically also include a will, durable POA, healthcare POA, and possibly a trust. - Review existing property titling. Property currently held as joint tenancy or simple community property may benefit from conversion to CPRS. - Engage an Arizona estate planning attorney. CPRS title work and conversions benefit from professional drafting.
Who this affects most
Arizona's community property with right of survivorship is most consequential for:
- Married Arizona couples seeking probate avoidance with community property tax advantages - Couples with significant appreciated assets where the double step-up in basis is valuable - Estate planners advising on Arizona-specific tools - Couples relocating to Arizona from non-community-property states wanting to capture community property benefits
CPRS is one of Arizona's distinctive estate planning tools. The combination of probate avoidance, community property characterization, and double step-up makes it attractive for many married Arizona couples.