The Arizona Estate Advantages Transplants Miss: The Double Step-Up and the Beneficiary Deed

When you move to Arizona from Illinois, Minnesota, New York, or most other states, you cross an invisible line that can save your family a large capital gains bill, and almost nobody tells you about it. Arizona is a community property state, and that status can hand a surviving spouse a full step-up in basis on an entire asset instead of just half. Layer on the Arizona beneficiary deed and no state estate tax, and Arizona offers married couples a genuinely favorable estate landscape, if you title things correctly. Here is what to know and what to fix.

The double step-up: Arizona's quiet advantage for couples

"Step-up in basis" means that when someone dies, the cost basis of their assets resets to the fair market value at death, wiping out the unrealized capital gain. In a separate-property state, when the first spouse dies, generally only their half of a jointly owned asset steps up. In a community property state like Arizona, assets held as community property, including community property with right of survivorship (CPWROS), generally get a full step-up on the entire asset at the first death. Both halves reset.

Easy numbers show why this matters. A couple bought a rental (or a big stock position) years ago for $200,000; it is worth $1,000,000 when the first spouse dies. The unrealized gain is $800,000.

The catch is titling. The double step-up flows from holding the asset as community property. Transplants often arrive with assets titled as joint tenants (the form their old state used), which may not deliver the full step-up. Re-titling eligible assets as community property with right of survivorship after a move is one of the highest-value, lowest-effort estate moves a new Arizona couple can make, and it is exactly the kind of thing that slips through the cracks because everything "still works" the way it did before.

The beneficiary deed: probate avoidance without a trust

Arizona law (A.R.S. § 33-405) authorizes the beneficiary deed, a transfer-on-death deed for real estate. You record a deed naming who inherits the property at your death; it has no effect while you are alive (you can sell, refinance, or revoke freely), and at death the property passes to your named beneficiary outside probate. For a homeowner whose main probate exposure is the house, it can accomplish much of what people set up a revocable living trust to do, at a fraction of the cost and complexity. It is not a full substitute for a trust in complex estates, but for many Arizona families it is the simplest tool that solves the biggest problem.

Two things Arizona does not do

• No tenancy by the entirety. If your old state let married couples own property as tenants by the entirety, Arizona does not offer it. Your Arizona equivalent is community property (with or without right of survivorship), and which form you choose affects both the step-up and creditor exposure, so it is worth a deliberate decision, not a default.
• No state estate or inheritance tax. Arizona imposes neither, so only the federal estate tax, which reaches very large estates, applies. For couples relocating from a state with its own estate tax at a low threshold, this can be a meaningful reason the move pencils out.

What to do after an Arizona move

The recurring theme is titling and documents that quietly carried over from your old state and no longer fit. A short checklist for a new Arizona couple: review how each major asset is titled and consider community property with right of survivorship where the step-up benefit applies; consider a beneficiary deed on the home; and refresh your estate documents under Arizona law rather than assuming your old-state will and trust still do what you intend. This pairs closely with the tax side of a move; my guides to Arizona's retiree tax rules and establishing domicile cover the income-tax half of the same transition.

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