Morris Hall, PLLC

Estate Planning Attorneys

MakePayment with multiple options
CALL NOW: 1 (888) 222-1328
  • Home
  • Our Firm
    • About Morris Hall
    • Attorneys
    • Our Team
    • Morris Hall Core Values
    • Communities We Serve
      • Carefree
      • Chandler
      • Flagstaff
      • Mesa
      • Oro Valley
      • Phoenix
      • Prescott
      • Scottsdale
      • Sedona
      • Tucson
    • Career Opportunities
  • Estate Planning Services
    • Advanced Estate Planning
    • Asset Protection
    • Power of Attorney
    • Trust Administration and Probate
    • Wills and Trusts
  • Resources
    • Blog
    • Do I Need an Estate Plan?
    • Elder Law Reports
    • Elder Law Resources
      • Phoenix Elder Law
      • Tucson Elder Law
    • Estate Planning Problems
    • FAQs
    • Probate Resources
      • Probate
      • Flagstaff Probate
      • Phoenix Probate
      • Sedona Probate
      • Tucson Probate
    • Published Books
      • Don’t Go Broke in a Nursing home
      • Tax Free Money for Long-Term Care!
    • Recent Law Changes and Improvements Affecting Arizona
      • Update My Living Trust
    • Reports
    • Videos
    • What to Do When Death Occurs
      • What Not To Do When Someone Dies
      • Who To Contact After A Loved Ones Death
  • Reviews
    • Testimonials
    • Review Us
  • Locations
  • Events
    • Seminars / Webinars
    • Past Webinar Recordings
  • Contact
    • Consultation Policy
    • Contact Us
    • Discounts

Community Property: Is Arizona a Good State To Die In?

January 27, 2016 by Theron M. Hall Jr. Leave a Comment

If you must choose between having your estate plan prepared in a community property state or a separate property state, you should choose community property every time. Arizona is one of only nine community property states. The other community property states are: 1) California, 2) Nevada, 3) 4) Idaho, 5) Washington, 6) Wisconsin, 7) Texas, and 8) Louisiana. The main reason to do your estate planning in a community property state is to minimize taxes.

There are all sorts of taxes that you need to be aware of when establishing an estate plan, they include income tax, inheritance tax, gift tax, estate tax, generation skipping transfer tax, state estate tax, excise tax, and capital gains tax. Doing your estate planning in a community property state can significantly decrease and often times even eliminate the amount of capital gains taxes when death occurs.

In a community property state, capital gains tax on community assets can be eliminated by receiving a full step up in tax basis when a loved one dies. I think an example would best illustrate what I mean by a step up in tax basis. Let’s assume that you and your spouse purchased some property in Arizona back in 1970 as an investment for $10,000.  That initial $10,000 payment is what the IRS calls your cost basis in the investment. Let’s say that same community asset is worth $110,000 today. Your original cost basis in the property is $10,000, but now that it has appreciated to $110,000, you have a $100,000 gain in the property. If you sell the property this year for $110,000, then you owe a capital gains tax on the $100,000 gain. In the alternative, had you not sold the property this year, but instead held on to it and died this year leaving it to your spouse, and then your spouse sold it for the $110,000, he/she would not have to pay any capital gains tax. In this scenario, the IRS would have allowed the surviving spouse to step up the cost basis in the property from the original $10,000 cost basis in 1970 to the date of death fair market value of $110,000, effectively wiping out any gain in the property.

How would this same scenario play out in any other state that is not a community property state? When the first spouse dies the surviving spouse only gets a half step up in tax basis on the property. Remember the original cost basis was $10,000 in 1970 and now today it is worth $110,000, which means a $100,000 gain. In a separate property state the survivor would only get a step up in basis on half the value ($50,000) and therefore would have to pay capital gains tax on the other half ($50,000). This is not great planning.

In addition to receiving a full step up in basis, Arizona currently does not have a state estate tax or inheritance tax. Although these tax advantages may change in the future, their present benefits make Arizona a great state to die in.

The attorneys at Morris Hall, PLLC have been practicing estate planning for over 40 years. We would love to help you create your estate plan in the wonderful Wild West state of Arizona.

  Contributed by Morris Hall, PLLC Arrowhead, Phoenix and Scottsdale Estate Planning Attorney and Partner, David T. Eastman.

What the Attorneys of Morris Hall, PLLC Can Do For You:
The attorneys at Morris Hall have hundreds of years of combined experience ensuring that families’ assets are protected from probate, unnecessary taxes, creditors, ex-spouses and Medicaid spend-down.  Our Arizona offices are located in Phoenix, Mesa, Scottsdale, Carefree, Tucson, Oro Valley, Prescott, Flagstaff and Arrowhead.    Contact us today at 888.222.1328 to schedule an appointment!

This blog should be used for informational purposes only.  It does not create an attorney-client relationship with any reader and should not be construed as legal advice.  If you need legal advice, please contact an attorney in your community who can assess the specifics of your situation.

 

  • Author
  • Recent Posts
Theron M. Hall Jr.
Theron M. Hall Jr.
Senior Partner at Morris Hall, PLLC
Theron M Hall, Jr. (aka Tim) learned early in life the need of proper management of estates for their preservation. Born and raised in Apache County, Arizona, Tim worked for his parents’ title company as a youth, where he gained a lasting appreciation for those who work hard to acquire their estates. Now, as an estate planning attorney, protecting his clients’ future through quality legal service has become his hallmark.
Theron M. Hall Jr.
Latest posts by Theron M. Hall Jr. (see all)
  • Phoenix Estate Planning For Children - December 15, 2022
  • Social Security Retirement: Understanding The Benefits - November 18, 2021
  • Protecting Your Farm or Ranch in Your Estate Plan - October 20, 2021

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

MH logo

Main Office

7600 N 16th St, Ste 105

Phoenix, AZ 85020

Phone: 602-249-1328

Fax: 602-248-2887

Subscribe to Our Newsletter

For a sample Click Here

Offices

Our law firm proudly serves many areas in Arizona. See all of our locations here.

Our law firm proudly serves the state of Arizona.  See all of our locations here.

Toll Free: 888-222-1328

Mon-Thur: 8:00am – 5:00pm
Fri: 8:00am – 4:00pm

  • Linkedin
  • Twitter
  • Facebook
  • Youtube
  • Instagram

Need an Estate Planning Lawyer in Arizona?

Looking for an estate planning attorney near you? We have office locations in Phoenix, Mesa, Chandler, Scottsdale, West Valley, Carefree, Prescott, Sedona, Flagstaff, Tucson, and Oro Valley in Arizona so please visit us at the location that is closest to you.

  • © 2023 American Academy of Estate Planning Attorneys, Inc All rights reserved.
  • Disclaimer