Like many western states, Arizona allows legally married couples to own real estate as community property, with or without rights of survivorship. The rules and definitions are set forth at Section 33-431 of the Arizona Revised Statutes. Under this form of ownership, both spouses hold undivided shares of the whole, and when one spouse dies, the survivor gains ownership of the whole property without the need for probate, and both halves receive a new tax basis equal to the fair market value as of the date of death. Otherwise, when one spouse dies, the community property is divided equally, with half going to the surviving spouse and half distributed as directed by the deceased spouse’s will. In case of divorce or annulment, the judge often determines equitable distribution of community property.
Under 33-431(C), a grant or devise to a married couple may, by express words, vest the estate in the surviving spouse on the death of one of the spouses when expressly declared in the grant, transfer or devise to be an estate in community property with right of survivorship. An estate in community property with right of survivorship may also be created by grant or transfer from a husband and wife, when holding title as community property or otherwise, to themselves or from either husband or wife to both husband and wife.
Generally, anything that a married couple accumulates during the marriage is considered community property. Assets acquired prior to the marriage, or gifts, wills, and inheritances are usually sole and separate (individual) property. The principles of community property are meant to address the unfairness that can occur when both parties contribute substantially to the marriage but only one party handles transactions or makes more money and ends up with all titles or assets in his/her name only.
Section 33-431(D) further states that in the case of real property owned by spouses as community property with right of survivorship, the right of survivorship is extinguished as provided in section 14-2804, or on the recordation in the office of the recorder of the county or counties where the real property is located, an affidavit titled “affidavit terminating right of survivorship” executed by either spouse under oath, that sets forth a stated intent by the spouse to terminate the survivorship right, a description of the instrument by which the right of survivorship was created including the date the instrument was recorded and the county recorder’s book and page or instrument reference number and the legal description of the real property affected by the affidavit. The recordation shall not extinguish the community interest of either spouse, so they still share ownership, but can individually convey include their rights in a will.
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Community property can be confusing, so contact an attorney with questions about it, or for any other issues related to real property in Arizona.