Arizona Estate Planning & Real Estate Guide 2026

Why Real Estate Estate Planning Matters in Arizona

Arizona real estate has appreciated dramatically over the past decade. A home purchased in Chandler for $320,000 in 2015 might be worth $620,000 today. A Scottsdale luxury home purchased for $900,000 in 2018 may now be worth $1.6 million. That appreciation — often $200,000 to $700,000+ per property — represents the largest single asset most Arizona families own.

Without proper estate planning, that asset doesn't smoothly transfer to heirs. It may be tied up in Arizona probate court for 9–18 months, cost 3–6% of the property's value in legal and administrative fees, become subject to creditor claims, or create family conflict when multiple heirs have competing interests in a single property.

The good news: Arizona law gives property owners powerful, low-cost tools to avoid all of these outcomes. A beneficiary deed costs roughly $15–$30 to record. A revocable living trust costs $1,500–$5,000 with an estate planning attorney. These costs are trivial compared to a $600,000 home going through probate and costing $18,000–$36,000 in fees.

This guide covers the full landscape of Arizona estate planning tools as they apply to real property — what each tool does, when to use it, and how to avoid the most common mistakes.

Arizona Property Ownership Types

How you hold title to Arizona real estate determines what happens to it when you die, who has authority over it during your lifetime, and what creditor protections apply. There are five primary ways to hold title in Arizona:

1. Sole and Separate Property

Owned by one individual alone. When an unmarried person buys property, they hold it as sole and separate property. A married person can also hold property as sole and separate if their spouse signs a disclaimer deed waiving any community property interest. At death, sole and separate property must go through probate — or through a beneficiary deed or trust — to transfer to heirs.

2. Tenancy in Common (TIC)

Two or more people each own an undivided percentage interest in the property. Interests can be unequal (e.g., 60%/40%). Each co-owner can sell, mortgage, or will their interest independently. At death, a TIC owner's interest passes through their estate (probate or trust). Common among business partners, investors, and family co-ownership situations.

3. Joint Tenancy With Right of Survivorship (JTWROS)

Two or more people own the property with a right of survivorship — when one owner dies, their interest automatically transfers to the surviving owner(s) without probate. All joint tenants must hold equal shares. A joint tenant can sever the joint tenancy by conveying their interest, which converts it to a tenancy in common. Joint tenancy requires the "four unities" — same time of acquisition, same title instrument, equal interest, equal possession rights.

4. Community Property

Arizona is one of nine community property states. Property acquired during marriage (with certain exceptions) is owned 50/50 by both spouses. At death, a decedent can only dispose of their 50% share by will or other estate planning document. The surviving spouse retains their 50% automatically. Community property gets a full step-up in basis for BOTH halves at the first spouse's death (a massive tax advantage discussed below).

5. Community Property With Right of Survivorship (CPWROS)

Arizona's most powerful ownership structure for married couples, established by ARS §33-431. Combines the tax benefits of community property (full step-up in basis on both halves) with the probate-avoidance of joint tenancy (automatic survivorship). If one spouse dies, the surviving spouse receives 100% of the property without probate AND gets a full step-up in basis on the entire property. This is the gold standard for married Arizona couples who want both estate planning efficiency and tax optimization.

Community Property & Community Property With Right of Survivorship

What Is Community Property?

In Arizona, property acquired during marriage (wages earned, property purchased with marital income) is presumed to be community property — owned equally by both spouses. Separate property includes assets owned before marriage, inherited by one spouse, or received as a gift to one spouse (even during marriage), as long as these are kept separate and not commingled with community assets.

Community property has one enormous tax advantage: the IRS provides a full step-up in basis on BOTH the decedent's half AND the surviving spouse's half of community property at death. This contrasts with separate property or property held in joint tenancy (JTWROS), where only the decedent's half gets stepped up.

Example of the Community Property Tax Advantage

A couple buys a Phoenix home in 2005 for $300,000 (their original basis). The home is worth $900,000 when Spouse A dies in 2026.

• If held as Community Property or CPWROS: Entire $900,000 becomes Spouse B's new basis. If Spouse B sells the next day for $900,000, capital gains tax = $0.
• If held as Joint Tenancy (JTWROS): Only Spouse A's 50% ($450,000) gets stepped up. Spouse B still has a $150,000 basis in their 50% (their original cost). If Spouse B sells for $900,000, they may owe capital gains on the $300,000 gain in their 50% share.

Creating CPWROS in Arizona

To hold Arizona real property as CPWROS, the deed must expressly state the property is held as "community property with right of survivorship." You cannot simply assume CPWROS — the intent must appear in the recorded instrument. If you currently own your Arizona home as joint tenants with your spouse and want CPWROS, you'll need to record a new deed conveying the property to yourselves as CPWROS.

Arizona Beneficiary Deed (ARS §33-405)

The Arizona beneficiary deed — sometimes called a "transfer on death" (TOD) deed in other states — is one of the most powerful and underutilized estate planning tools in the state. It allows a property owner to designate who will receive the property upon their death, entirely outside of probate, without affecting the owner's rights to the property during their lifetime.

Key Features of the AZ Beneficiary Deed

• Probate avoidance: The property transfers directly to the beneficiary at death, bypassing probate entirely.
• Revocable during lifetime: You can revoke or change the beneficiary at any time, simply by recording a new deed or a revocation document. The beneficiary has no current rights to the property.
• No affect on current ownership: You can sell, mortgage, refinance, or otherwise deal with the property as if no beneficiary deed existed. The beneficiary deed is only operative at death.
• Low cost: A beneficiary deed typically costs $15–$30 in recording fees, plus any attorney drafting fees (often $100–$300).
• Multiple beneficiaries: You can name multiple beneficiaries with designated shares, or name alternate (contingent) beneficiaries if a primary beneficiary predeceases you.
• Effectiveness at death: A certified copy of the death certificate must be recorded to effectuate the transfer, along with a Qualifying Affidavit in some counties.

Beneficiary Deed Process in Arizona

1. Draft the beneficiary deed clearly identifying the property, the transferor(s), and the designated beneficiary(ies) with their percentage shares and relationship to the owner.
2. Notarize the deed (required in Arizona).
3. Record the deed with the County Recorder (Maricopa County Recorder's office) during the owner's lifetime. Recording is REQUIRED — an unrecorded beneficiary deed is not effective.
4. No notification to the beneficiary is required (and often wise not to inform them, given the revocable nature).
5. At death: Record the death certificate with the County Recorder, along with any required affidavit, and the property title automatically vests in the named beneficiary.

When Beneficiary Deeds May NOT Be the Right Tool

• Minor children as beneficiaries: If the beneficiary is under 18, a court-appointed conservator will need to manage the property until the child reaches adulthood. A trust is better for minor beneficiaries.
• Beneficiary with special needs: An outright transfer can disqualify a special needs person from government benefits. Use a Special Needs Trust instead.
• Complex family situations: Multiple beneficiaries who might not get along; blended family situations; concern about a beneficiary's financial management. A trust with a trustee provides more control.
• Medicaid planning concerns: Arizona's AHCCCS (Medicaid) can potentially make an estate recovery claim against property transferred via beneficiary deed in certain circumstances. Consult an elder law attorney if Medicaid planning is relevant.
• You want conditions on the gift: A beneficiary deed is unconditional. If you want to say "my child gets the house only if they maintain it," a trust can impose such conditions; a beneficiary deed cannot.

Living Trusts vs. Wills for Arizona Real Estate

Revocable Living Trust

A revocable living trust (RLT) is a legal arrangement in which you (the "grantor" or "settlor") transfer your assets, including real property, to a trust — while retaining complete control during your lifetime as the trustee. At death, a successor trustee you designate takes over and distributes the assets to your beneficiaries according to the trust document — no probate required.

For Arizona homeowners with multiple properties, properties in multiple states, complex family situations, or a desire for privacy, a revocable living trust is often the best comprehensive estate planning vehicle for real estate.

Advantages of a Revocable Living Trust for Arizona Real Estate:

• Multi-property / multi-state flexibility: If you own a home in Scottsdale and a vacation property in Colorado, a living trust avoids probate in BOTH Arizona AND Colorado. Without a trust, you'd need separate probate proceedings in each state.
• Privacy: Trusts are private documents. A will becomes public record when filed in probate. The content of your trust, including who gets what, remains private.
• Incapacity planning: If you become incapacitated, your successor trustee can manage trust-held real estate immediately, without a court-supervised conservatorship proceeding.
• Complex distributions: A trust can specify conditions, timing, and management instructions for how real estate is handled — something a beneficiary deed cannot do.
• Protects against family disputes: A well-drafted trust with clear instructions is much harder to contest than a will.

Funding the Trust — Don't Skip This Step:

One of the most common estate planning failures in Arizona: people create a trust but fail to "fund" it — transfer their real property into the trust by recording a deed conveying the property from themselves to themselves as trustee. An unfunded trust provides no probate avoidance for the property. The deed to transfer Arizona real estate into a trust must be recorded with the county recorder.

Mortgage and Due-on-Sale Considerations:

Most mortgages contain a "due-on-sale" clause that technically triggers when ownership is transferred. However, the Garn-St. Germain Act (12 USC §1701j-3) provides a specific exception: transfer to a living trust where the borrower is and remains a beneficiary does not trigger the due-on-sale clause. You should still notify your lender as a courtesy and confirm the exemption applies, but this is generally a non-issue for standard residential trusts.

Last Will & Testament

A will directs who receives your property but does NOT avoid probate in Arizona. Your executor files the will with the Maricopa County Superior Court (or appropriate county probate division), and the court supervises asset distribution. For large estates, probate in Arizona typically takes 9–18 months and costs 3–6% of the estate value in attorney fees, court costs, and executor compensation.

A will is still important even if you have a trust — because you need a "pour-over will" that catches any assets not transferred to the trust before death and directs them to be added to the trust post-probate.

Arizona Probate — What Happens Without Planning

If you die owning Arizona real estate in your sole name — with no beneficiary deed, no living trust, and no other probate-avoidance mechanism — your estate must go through Arizona probate. Here's what that looks like:

Arizona Probate Timeline

1. File petition (Month 1): A family member or attorney files a petition for informal or formal probate with the Superior Court in the county where the decedent resided.
2. Publication notice (Month 1–4): Creditors must be notified by publication. Arizona law requires a minimum 4-month creditor claim period under ARS §14-3801.
3. Estate inventory & appraisal (Month 2–5): Personal representative (executor) identifies and values all assets.
4. Pay debts and expenses (ongoing): Creditor claims, estate administration costs, and taxes paid from estate assets.
5. Court approval and distribution (Month 9–18+): If all goes smoothly, court approves final accounting and assets are distributed. Contested probates or complex estates can take years.

Arizona Probate Costs

Arizona does not set attorney fees as a fixed percentage of estate value (unlike California). However, actual costs typically include:

• Attorney fees: $3,000–$15,000+ depending on complexity
• Court filing fees: $275–$500
• Publication costs: $200–$400
• Appraisal fees (real property): $400–$800
• Personal representative compensation: Reasonable compensation allowed by court
• Miscellaneous: $500–$2,000

Total cost on a $600,000 estate: Typically $8,000–$25,000 or more. This is money that comes directly from the estate before your heirs receive anything — and unlike a living trust or beneficiary deed, it provides no benefit to the estate whatsoever. It is pure waste from an estate planning standpoint.

Arizona Homestead Exemption (ARS §33-1101)

Arizona's homestead exemption protects up to $400,000 of equity in your primary residence from most unsecured creditor claims. This is a significant debtor protection that exists automatically for all Arizona homeowners — you do not need to file anything to claim the homestead exemption (unlike some states).

What the Homestead Exemption Protects Against:

• Unsecured creditor judgments: If a creditor sues you and wins a judgment, they generally cannot force the sale of your primary residence to collect the judgment if your equity is under $400,000.
• Bankruptcy: In federal bankruptcy, the Arizona homestead exemption is used by Arizona debtors to protect their home equity.

What the Homestead Exemption Does NOT Protect Against:

• Mortgage foreclosure by your lender
• HOA foreclosure for unpaid dues (ARS §33-1807)
• IRS tax liens
• Arizona state tax liens
• Mechanic's and materialmen's liens for construction work
• Purchase money mortgages (seller financing)

Homestead in Estate Planning Context:

The homestead exemption is a living protection — it protects your equity while you're alive. At death, the homestead exemption does NOT follow the property to your heirs in the same way. Your heirs who inherit and occupy the property as their primary residence can establish their own homestead exemption, but the protection is not automatically transferred.

No Arizona Estate Tax — But Federal Tax Still Applies

Arizona repealed its state estate tax in 2005. There is no Arizona estate tax, no Arizona inheritance tax, and no Arizona gift tax. This puts Arizona in a favorable position compared to states like Oregon (estate tax on estates over $1 million), Washington (estate tax on estates over $2.193 million), or Massachusetts (estate tax on estates over $2 million).

Federal Estate Tax (Still Applies):

The federal estate tax applies to estates exceeding the federal exemption amount. In 2025–2026, the federal exemption is $13.99 million per individual ($27.98 million per married couple with portability election). The tax rate on amounts above the exemption is 40%.

Without legislative extension, the Tax Cuts and Jobs Act (TCJA) provisions that doubled the exemption are scheduled to sunset after December 31, 2025 — dropping the per-individual exemption to approximately $7 million (adjusted for inflation). As of mid-2026, Congress is actively debating whether to extend the TCJA provisions. Arizona homeowners with large portfolios should consult their estate planning attorney about sunset risk.

For Arizona real estate investors with multiple properties, commercial holdings, or large portfolios, federal estate tax planning strategies include: irrevocable life insurance trusts (ILITs), grantor retained annuity trusts (GRATs), Spousal Lifetime Access Trusts (SLATs), family limited partnerships (FLPs), and installment sales to intentionally defective grantor trusts (IDGTs).

Step-Up in Basis — The Most Valuable Estate Planning Tool

Under IRC §1014, a person who inherits property receives a "stepped-up" cost basis equal to the property's fair market value on the date of the decedent's death (or, alternatively, the alternate valuation date six months later). For Arizona real estate, this is often the most significant tax planning tool available — more valuable than any other single estate planning strategy for most families.

How Step-Up Works in Practice:

Robert bought a Gilbert home in 2001 for $175,000. He dies in 2026 when the home is worth $640,000. His heir (daughter Sarah) inherits the property with a new basis of $640,000.

• Robert's capital gain if he had sold: $640,000 − $175,000 = $465,000 gain. At a combined 20% federal capital gains + 3.8% NIIT + 2.5% AZ state rate = approximately 26.3% = $122,295 in taxes.
• Sarah's capital gain if she sells immediately after inheriting: $640,000 − $640,000 = $0. Zero capital gains tax.
• Tax savings from step-up: $122,295 — on a single property.

For Arizona real estate portfolios with multiple properties and decades of appreciation, the step-up in basis can shelter millions of dollars of capital gains at death. This is a powerful argument AGAINST lifetime gifting of highly appreciated Arizona real estate — because a lifetime gift does NOT receive a step-up in basis (the recipient takes the donor's original cost basis), while an inheritance does.

Community Property Step-Up Advantage (Revisited):

For married Arizona couples, holding property as community property or CPWROS ensures that BOTH halves of the property receive a step-up in basis at the first death — not just the decedent's half. This doubles the step-up benefit compared to joint tenancy.

Capital Gains Planning for Arizona Homeowners (IRC §121)

Before thinking about estate planning tools, it's worth understanding the primary income tax exclusion available to Arizona homeowners during their lifetime: IRC §121, the primary residence capital gains exclusion.

• $500,000 exclusion for married couples filing jointly
• $250,000 exclusion for single filers
• Requirements: You must have owned and used the property as your primary residence for at least 2 of the last 5 years prior to the sale
• Can be used once every 2 years

Example: A Gilbert couple bought their home in 2015 for $380,000. They sell in 2026 for $720,000. Gain: $340,000. Excluded under IRC §121: $340,000 (under the $500,000 married exclusion). Capital gains tax: $0.

For homeowners with large appreciation, the IRC §121 exclusion and the step-up in basis work together powerfully. If your gain is within the exclusion amount, sell during your lifetime. If your gain exceeds the exclusion and you want to pass the home to heirs, hold it and let the step-up in basis at death eliminate the excess gain.

Holding Arizona Real Estate in an LLC

Many Arizona real estate investors and even some homeowners hold property through a limited liability company (LLC) structure. LLCs offer liability protection, privacy (the LLC name appears on public records rather than the owner's name), and flexible estate planning options.

LLC Structure for Arizona Real Estate Investors:

A typical structure: John Smith creates Smith Family Properties LLC, an Arizona LLC. The LLC owns rental properties in Chandler and Gilbert. John holds 100% of the LLC membership interests personally, or in a revocable living trust. At death, John's trust (or estate) transfers the LLC membership interests — not the deeds to individual properties — to his heirs.

Estate Planning Advantages of LLC Structure:

• Easy transfer: Gifting or bequeathing an LLC membership interest is a single transaction vs. multiple deeds for multiple properties.
• Valuation discounts: Fractional LLC interests may be valued at a discount (minority discount, lack of marketability discount) for federal gift and estate tax purposes — potentially 15–40% discount. This can reduce federal estate tax exposure for large portfolios.
• Liability protection: Creditors of the LLC generally cannot reach the personal assets of the member, and vice versa (a judgment against an LLC member typically results in a "charging order" against their LLC interest, not seizure of LLC assets).
• Business continuation: Operating agreement can specify exactly what happens to the LLC and its properties if a member dies or becomes incapacitated.

LLC Cautions and Complexity:

• Due-on-sale clause: Transferring mortgaged property from personal name to an LLC may trigger the due-on-sale clause in the mortgage. Unlike a revocable living trust, the Garn-St. Germain exemption does NOT apply to LLCs. Lender consent is typically required, or you transfer equity by deed and get a new mortgage at the LLC level — which typically requires 20–25% down for non-owner-occupied.
• Annual costs: Arizona LLCs require a $50 annual filing fee with the Arizona Corporation Commission. Additional ongoing costs for separate bookkeeping, tax returns (if taxed as a partnership), and professional services.
• Homestead exemption lost: Property titled in an LLC cannot claim the homestead exemption — only a natural person's primary residence qualifies.
• Primary residence capital gains exclusion: Property owned by an LLC does not qualify for the IRC §121 primary residence exclusion, which requires the taxpayer (individual) to own and use the property as their primary residence.

1031 Exchange as Estate Planning

A 1031 exchange (IRC §1031) allows real estate investors to defer capital gains taxes by selling one investment property and reinvesting the proceeds into another "like-kind" property within specific time limits. From an estate planning perspective, 1031 exchanges have a powerful compounding effect when combined with the step-up in basis at death.

The 1031-to-Step-Up Strategy:

1. An investor holds appreciated Phoenix rental properties worth $3 million, with a combined cost basis of $800,000 (if sold, the $2.2 million gain would trigger $500,000+ in capital gains taxes).
2. Through a series of 1031 exchanges over the years, the investor defers all capital gains — never paying tax — while growing the portfolio from $3 million to $8 million.
3. The investor dies with an $8 million portfolio. Heirs receive a step-up in basis to $8 million market value.
4. Heirs sell the properties for $8 million. Capital gains tax: $0.
5. The deferred gain — tens of millions in tax deferral over decades — is permanently forgiven at death.

1031 Exchange Rules (Basics):

• Both the relinquished property (sold) and replacement property (purchased) must be "like-kind" investment/business real property — not personal residences
• 45-day identification period: You must identify potential replacement properties within 45 days of selling the relinquished property
• 180-day close: The replacement property must close within 180 days of the sale of the relinquished property
• Qualified Intermediary (QI) required: The exchange proceeds must be held by a neutral QI — you cannot touch the funds
• Equal or greater value: To defer 100% of gain, the replacement property must be of equal or greater value and all equity must be reinvested

Irrevocable Trusts & Dynasty Trusts for Arizona Real Estate

While most of this guide covers revocable planning tools, some Arizona property owners with large estates or federal estate tax exposure benefit from irrevocable trust strategies that provide additional tax and creditor protection advantages.

Irrevocable Life Insurance Trust (ILIT)

A trust that owns a life insurance policy. The life insurance proceeds are paid to the trust (not the decedent's estate) at death, providing liquidity to pay estate taxes or equalize distributions among heirs — without the insurance proceeds being included in the taxable estate.

Qualified Personal Residence Trust (QPRT)

The owner transfers their primary residence into an irrevocable trust for a fixed term (say, 10 years), retaining the right to live there during the term. At the end of the term, the property passes to the named beneficiaries (typically children). The gift is valued at a discounted amount (the present value of the remainder interest), reducing federal gift tax exposure. If the owner outlives the trust term, the full appreciated value of the home passes outside the estate. Risk: If the owner dies during the trust term, the property reverts to the estate.

Arizona Dynasty Trust (Perpetual Trust)

Arizona permits perpetual trusts (no rule against perpetuities for trusts). A dynasty trust can hold Arizona real estate for multiple generations, with beneficiaries receiving income and principal distributions per trustee discretion, while the assets remain outside each generation's taxable estate. This is particularly valuable for family investment properties, vacation homes, or land holdings.

7 Common Estate Planning Mistakes Arizona Homeowners Make

1. Failing to record a beneficiary deed or create a trust while healthy. Estate planning requires mental capacity. If you develop dementia, Alzheimer's, or are in a coma, you can no longer sign estate planning documents. Do this now, not later.
2. Holding title as joint tenancy with a spouse instead of CPWROS. The joint tenancy JTWROS check-box on a grant deed is the most expensive checkbox in Arizona real estate — it costs you the step-up in basis on your spouse's half of the property. Convert to CPWROS.
3. Creating a living trust but not funding it. Your trust document does nothing for your house unless you record a deed conveying the property into the trust. This is called "funding" the trust and is a separate legal action.
4. Not updating beneficiary designations after life events. Divorce, death of a named beneficiary, or birth of a new child requires updating your beneficiary deed (or trust). An ex-spouse named as beneficiary on your home could inherit it — even if you're divorced — if the beneficiary deed wasn't updated.
5. Gifting highly appreciated property to children during your lifetime. When you gift appreciated property, the recipient takes your original cost basis (carryover basis). No step-up. If the property is worth $700,000 and you paid $200,000, your gift recipient owes capital gains tax on $500,000 when they sell. Inheriting the same property gets a step-up and potentially $0 in capital gains tax. Unless there's a specific need for the lifetime gift, it's almost always better to hold until death.
6. Putting a home in an LLC without addressing the due-on-sale clause. This can technically trigger default on your mortgage. Get lender approval or work with an attorney on the proper structure.
7. No financial or healthcare power of attorney. Estate planning isn't only about death. If you're incapacitated, who manages your real estate? Who signs contracts, responds to tenant issues, or coordinates with your property manager? A durable financial power of attorney and healthcare proxy are essential complements to your real estate estate planning.

Data Tables

Table 1: Arizona Probate vs. Estate Planning Tool Cost Comparison

Table 2: Step-Up in Basis Scenarios for Arizona Real Estate

Table 3: Arizona Estate Planning Checklist by Situation

Talk to Ryan Moxley

Ryan Moxley is a top-1% REALTOR® with My Home Group serving the entire Phoenix metro. He works with estate attorneys, CPAs, and financial advisors to help his clients make informed decisions about their Arizona real estate holdings. Contact Ryan for a free consultation.

Arizona Specific Estate Planning Considerations for Real Estate Investors

Depreciation Recapture Planning

For Arizona real estate investors who have claimed depreciation deductions over the years, the step-up in basis at death eliminates not only capital gains tax but also depreciation recapture tax. Under IRC §1250, depreciation taken on real property is recaptured at death when the property receives a stepped-up basis. This makes the hold-until-death strategy particularly powerful for rental property investors who have claimed significant depreciation.

Example: A Mesa rental property was purchased for $350,000 in 2000 and has been depreciated to an adjusted basis of $130,000 through $220,000 in depreciation deductions. The property is now worth $600,000. If sold during the owner's lifetime:

• Depreciation recapture tax (25%): $220,000 × 25% = $55,000
• Capital gains tax on remaining appreciation: ($600,000 − $350,000) × 20% = $50,000
• Total tax: $105,000+

If held until death and inherited: New basis = $600,000. All depreciation recapture permanently forgiven. Heirs start with a fresh basis and can begin depreciating again.

Inherited IRA and Real Estate Coordination

Many Arizona investors hold both real estate and retirement accounts (IRAs, 401(k)s). These assets have very different estate planning characteristics. Real estate receives the step-up in basis at death; IRAs do not — IRA withdrawals are ordinary income to beneficiaries. This creates an important asset location strategy: leave IRA assets (which have always been pre-tax) to beneficiaries in a lower income tax bracket, and leave real estate (which can receive step-up in basis) to higher-income beneficiaries who would benefit most from the capital gains elimination.

Arizona Community Property Agreement

Spouses who own assets in both community property states and common-law states may be able to execute a Community Property Agreement to characterize all their property (wherever located) as community property, thereby obtaining the full step-up in basis for all jointly owned assets. This requires careful drafting and should be reviewed by attorneys in each relevant state.

Special Considerations for Vacation Homes and Investment Properties

Arizona's STR (short-term rental) law under ARS §9-500.39 protects the right to rent properties on platforms like Airbnb. From an estate planning perspective, properties used as STRs or vacation rentals are treated as investment property for estate planning purposes (not primary residences) unless you use the property for personal use more than 14 days or 10% of the days rented annually. This affects whether IRC §121 exclusion applies and how depreciation is calculated.

Qualified Opportunity Zone Investments in Arizona

Arizona has several designated Qualified Opportunity Zones (QOZs) — primarily in Phoenix, Mesa, and Tucson. Investing capital gains into a Qualified Opportunity Zone Fund (QOZF) allows investors to defer, reduce, and potentially eliminate capital gains taxes on the original investment, while also exempting gains from the QOZ investment itself if held 10+ years. For Arizona real estate investors selling appreciated properties, QOZ investments can be an alternative or complement to 1031 exchanges.

ADRD — Arizona Department of Revenue and Estate Planning

Arizona imposes no state estate, inheritance, or gift taxes. However, Arizona does impose income tax on capital gains (at the 2.5% flat rate as of 2023). Estate planning strategies that minimize capital gains — particularly the step-up in basis — therefore also minimize Arizona state income tax exposure.

How to Work With an Arizona Estate Planning Attorney on Your Real Estate

When you meet with an Arizona estate planning attorney to address your real estate holdings, come prepared with:

• A complete list of all properties you own — address, how title is vested, approximate value, and outstanding mortgage balance
• Your most recent property tax statements (shows how title is currently recorded)
• Your current will, trust, and any existing beneficiary deeds
• Names, ages, and relationships of all intended beneficiaries
• Any special circumstances: beneficiaries with special needs, concern about a beneficiary's financial management, blended family situations, divorce
• Your overall financial picture — retirement accounts, life insurance, other significant assets
• Any properties in multiple states

Expect to pay $1,500–$5,000 for a comprehensive estate plan including a revocable living trust, pour-over will, durable power of attorney, and healthcare directives — plus $200–$500 per property for deed preparation and recording to fund the trust. This is a one-time cost that typically saves 10–20x in probate costs and potentially hundreds of thousands in capital gains taxes.

Maricopa County Resources for Arizona Estate Planning

Several county and state resources are relevant for Arizona homeowners doing estate planning:

• Maricopa County Recorder: recorder.maricopa.gov — Search existing recorded deeds, record new deeds, beneficiary deeds, and trust instruments. Recording fee: approximately $15–$30 for most documents.
• Maricopa County Assessor: mcassessor.maricopa.gov — View how your property is currently titled, current assessed value, and ownership information.
• Arizona Superior Court Probate Division: Handles probate proceedings for Maricopa County. Filing fees vary based on estate size.
• State Bar of Arizona Lawyer Referral Service: azbar.org/findanattorney — Free referral to estate planning attorneys in Arizona.
• Arizona Department of Revenue: azdor.gov — Information on Arizona income tax treatment of real estate gains.

Arizona Senior Homeowner Estate Planning: Special Considerations

For Arizona seniors (65+) who are planning their estates, several additional considerations apply:

Senior Valuation Protection (ARS §42-17302)

Arizona seniors age 65 or older with a primary residence whose assessed value has increased dramatically can apply to "freeze" their property's assessed value for three-year periods. This is a property tax program rather than an estate planning tool, but it directly affects the carrying costs of holding Arizona real estate in retirement. Apply at your county assessor's office. Income limits apply: household income cannot exceed $35,184 (2026 approximate limit).

Reverse Mortgage and Estate Planning

Arizona seniors who take out a Home Equity Conversion Mortgage (HECM — reverse mortgage) should understand the estate planning implications. A reverse mortgage is due and payable when the borrower permanently leaves the home, including at death. Heirs who want to keep the home must refinance or pay off the reverse mortgage balance. Heirs who want to sell may owe less than the home is worth (non-recourse feature: heirs never owe more than the home's value). A beneficiary deed or trust can still be used with a reverse mortgage — the beneficiary/trust simply inherits the home subject to the reverse mortgage obligation.

Medicaid (AHCCCS) Estate Recovery

Arizona's Medicaid program (AHCCCS — pronounced "access") may seek reimbursement from a deceased recipient's estate for long-term care costs paid. This can affect real property. AHCCCS estate recovery claims are generally limited to the "probate estate" — meaning property that goes through probate. A beneficiary deed or living trust that avoids probate may also avoid AHCCCS estate recovery in many cases, but this is a nuanced area of law that changes. Consult an elder law attorney if AHCCCS coverage is a concern.