Arizona is a community property state and the way in which one takes title to property can have far reaching legal and tax consequences. If in question, the buyer should consult with a real estate or tax attorney, and/or an accountant.
Taking title as Sole and Separate Ownership is the method single people, corporations, cities, or other legal persons take title to property. Upon death, the estate of the decedent passes to his/her heirs. If a married person takes title as Sole and Separate property, the spouse will be asked to sign a disclaimer deed.
Joint tenancy with the right of survivorship is a method of taking title whereby the interest of one joint tenant, upon death, passes to the surviving tenants automatically.
Any two or more persons can take title as joint tenants. All joint tenants must take title at the same time, must acquire their property through the same deed, hold equal and undivided interest in the property, and have equal right to possess the property fully. A person can convey his/her joint tenancy to another person without the permission of the remaining joint tenants. The person who acquires the new interest takes title as a Tenant in Common.
Property acquired by a husband and wife during marriage is Community Property. Each spouse has a 50% undivided interest in the property, and upon the death of one spouse, his/her 50% interest is passed to the heirs. There is no automatic right of survivorship, but the surviving spouse retains his/her 50% interest.
The Arizona Legislature authorized Community Property with the Right of Survivorship in 1994. This permits a legally married couple to hold property as community property, and upon the death of one spouse, his or her interest passes to the surviving spouse without probate. Legally married couples should ask their accountant or attorney about the benefits of holding title in this manner.
Tenancy in Common is the method of owning property by two or more persons, either natural or legal (such as a corporation) with no right of survivorship. Arizona law assumes if property is acquired by two or more persons, other than a legally married couple, the method in which title is to be taken will be Tenancy in Common. Each person holds a separate and distinct undivided interest in the property. Upon death of one of the owners, the property passes to his/her heirs.
Before taking title to any property, the buyer should understand the legal and tax ramifications of the method of ownership. Taking title one way over another way can save estate tax dollars, and can impact the heirs to the property. But consultation with a real estate attorney, a tax attorney, or the title company should answer questions.