Is Community Property Better For Trusts?
Arizona is a community property state for married couples. It is not available for unmarried couples. Community property is an ownership status that is favored for estate tax and capital gains tax (step up in basis).
It also allows for much more flexibility in planning with trusts. In other common law states, it is necessary to divide assets for estate tax planning purposes before death. However, with community property, it is possible to divide assets for tax planning purposes after death.
This means there is a tremendous amount of flexibility for the surviving spouse. This can be important because the assets may be split differently depending on which spouse dies first.
If you have moved to Arizona, and have two trusts designed in other states, it may make sense for you to explore and consider the benefits of changing ownership to community property. However, this is a highly individualized decision and it will be important to discuss this with a qualified Arizona estate planning attorney experienced and educated in tax planning.
