Community property with right of survivorship (CPWROS) is a way for married couples in Arizona to hold title to real estate. When one spouse passes away, the property goes to the surviving spouse on its own. No probate needed. Because Arizona is a community property state, CPWROS also gives a full step up in basis on the whole property. That can save thousands in capital gains taxes.
How CPWROS Works
When you title your home as community property with right of survivorship, both spouses own it equally. At the first death, the surviving spouse becomes the sole owner right away. There is no court filing, no probate, and no waiting. A new deed is recorded along with a death certificate. Ownership transfers just like that.
The biggest tax plus comes from the step up in basis. With CPWROS, the full property (not just the deceased spouse's half) gets a new tax basis. That basis equals the home's fair market value at the date of death. If the surviving spouse later sells the home, capital gains tax is based on that new value. Not the old purchase price. This is a major benefit that joint tenancy does not offer.
How CPWROS Compares to Joint Tenancy
Joint tenancy with right of survivorship also avoids probate. But it only gives a step up in basis on the deceased spouse's half. CPWROS gives the full double step up. For a couple who bought their home decades ago, the gap could mean tens of thousands of dollars in tax savings. That is a big deal.
Tenancy in common is yet another option. It does not include any auto transfer at death. Each spouse's share passes through their will or trust. That usually means probate. More time, more cost, more hassle.
When a Trust May Be the Better Choice
A living trust does more than just avoid probate on the first death. A trust provides:
- Probate avoidance at both the first and second death
- Safety if either spouse becomes too sick to manage their own affairs
- Control over who inherits after both spouses pass away
- Privacy, since trust transfers do not create a public record
CPWROS only handles the first death. At the second death, the home will still go through probate. That is true unless it is in a trust or has a beneficiary deed attached. Planning for both deaths is the key.
Using Both Together
Many Arizona couples use CPWROS and a trust together. They hold the home as community property with right of survivorship for the tax basis benefit. They also have a trust that covers the property at the second death. This gives the best of both worlds. A full step up in basis at the first death. Probate avoidance at both deaths.
For a deeper look at how these tools work together, read our guide on CPWROS in Arizona. The right mix depends on your real estate, your family, and your long-term goals. That is worth getting right the first time.
Related guide: For how married couples should choose between CPWROS and a trust, see our guide on Estate Planning When You Get Married in Arizona.