Your Securities Gift Grows With Your Portfolio
Investments change over time. Companies merge. Stocks split. Dividend reinvestment plans automatically buy additional shares. If a will says "I leave my 100 shares of XYZ Corp to my daughter," what happens when those 100 shares become 200 after a stock split?
Arizona law answers clearly: the gift includes the additional securities. The additional shares must have been acquired because of your ownership of the original shares, not through a separate purchase at the market sale price.
If a testator executes a will that devises securities and the testator then owned securities that meet the description in the will, the devise includes additional securities owned by the testator at death to the extent the additional securities were acquired by the testator after the will was executed as a result of the testator's ownership of the described securities.
A.R.S. § 14-2605(A)This covers three specific categories. Shares received through corporate actions like stock splits or reorganizations. Shares received through mergers or acquisitions. Shares acquired through a reinvestment plan. It does not cover shares you independently buy on the open market after signing the will.
Cash Dividends Are Excluded
There is one clear exception. Cash distributions paid to you before death are not part of the gift. If your shares paid quarterly dividends into your brokerage account over the years, those cash amounts belong to the general estate.
Distributions in cash before death with respect to a described security are not part of the devise.
A.R.S. § 14-2605(B)This distinction matters for estate settlement. The person inheriting the securities gets the shares, including any that accumulated through corporate activity. But the dividends that were already paid out belong to the estate. Probate attorneys often help families sort through these details.
An inherited asset like stock may also carry tax implications. The purchase price resets to the fair market value at the time of death for capital gains taxes purposes. This step-up in basis can significantly reduce the taxes a beneficiary must pay if they later sell the stocks. Understanding these rules helps families plan ahead and avoid surprises.