Most estate planning advice you find online treats wills and trusts as paperwork problems: get the right document, sign it correctly, you’re done. That’s mostly fine, but it misses the tax angle that often matters more than the paperwork itself.
What follows is the four mistakes I see most often in Arizona estate plans, especially ones drafted without a tax lens. Two of them are pure-Arizona issues; two of them apply anywhere but bite especially hard in a community property state. All four have straightforward fixes at drafting time.
Two specific tools you’ll see mentioned throughout: the Arizona living trust and the community property step-up rules. Together they’re responsible for most of the tax-relevant choices in an Arizona estate plan.
01
Treating community property as separate property in a married trust
Arizona is one of nine community property states, which means most assets a married couple acquires during marriage are owned 50/50, regardless of whose name is on the title. A properly drafted trust captures the full step-up in basis on the entire community asset when the first spouse dies. A trust that funds incorrectly (or doesn't say the right things about community property) loses half of that benefit.
Example. Mike and Lisa bought their Phoenix home in 1998 for $180,000. It's worth $620,000 today. If their trust correctly characterizes the home as community property and Mike dies first, Lisa gets a stepped-up basis on the entire $620,000 value. If she later sells, her gain calculation starts at $620,000 (so likely no capital gains tax). If the trust accidentally treats half the home as Mike's separate property, Lisa only gets a step-up on his half. She inherits her own half at the original 1998 basis. A future sale triggers capital gains on $220,000+ of appreciation. That's $30,000+ in unnecessary federal tax.
The fix: a one-line community-property agreement integrated with the trust. We draft this as standard practice. Most generic templates don't.
02
Naming the wrong person as IRA beneficiary
Retirement accounts (IRAs, 401(k)s, 403(b)s) pass by beneficiary designation, not by will or trust. They skip probate. They also have specific tax rules that interact with who you name. Naming "my estate" or naming a trust without designing it for retirement accounts can compress distribution periods and accelerate income tax.
Since the SECURE Act, most non-spouse beneficiaries have to drain inherited retirement accounts within 10 years. If a beneficiary is in a high tax bracket during that window, the forced distributions can push them higher. If the IRA passes to your estate or to a generic trust that isn't designed as a "see-through" trust, the distribution period can shrink to 5 years, which is even worse tax-wise.
The fix at drafting: review every retirement-account beneficiary designation, name the surviving spouse as primary (best outcome under current law), and name a properly drafted trust or specific individuals as contingent. We don't draft a trust without this conversation. [VERIFY WITH JON: confirm current SECURE Act treatment for any 2026 changes.]
03
Funding the trust incompletely (or not at all)
An unfunded trust is a $1,500 piece of decorative paper. The trust holds nothing until you actually retitle your assets into it. This is the most common DIY mistake and it shows up in attorney-drafted trusts too. People sign the document, leave the firm, and never finish the funding step.
What "funding" means: retitling your home into the trust (record a new deed at the county), retitling bank accounts as held by the trustee of the trust, retitling investment accounts, updating retirement-account beneficiary designations to coordinate (not necessarily to retitle into the trust). For most Arizona families it's 4 to 8 transactions, total.
The fix: every trust package we draft includes funding instructions, the certification of trust banks need, and a checklist. About 80% of clients get it done within 60 days of signing. We follow up with the other 20% because an unfunded trust is one of those things we'd rather call you about than let slip.
04
Forgetting about Arizona’s small-estate threshold and beneficiary deeds
Arizona has two specific tools that don't exist in many other states: a simplified small-estate procedure (for estates under $75,000 personal / $100,000 real) and beneficiary deeds (which transfer real estate at death without probate). People over-engineer plans (paying for trusts they don't need) or under-engineer (relying on a will when a beneficiary deed plus will would skip probate cleanly).
Example. Maria is single, 38, owns a small Phoenix condo and not much else. She doesn't need a $1,200 trust. She needs a basic will ($500) plus a beneficiary deed on the condo (~$300 plus the county recording fee). Total: under $1,000. Result: at her death, the condo transfers directly to her named beneficiary, no probate. Her remaining personal property goes through Arizona's simplified small-estate procedure because it's well under the $75,000 threshold.
This is Arizona-specific. Out-of-state templates and DIY services typically don't know about beneficiary deeds, so they either over-recommend trusts or under-recommend everything. The fix is just knowing the Arizona toolset. We ask about real estate specifically because the right tool depends on it.
A pattern these mistakes share
None of these are exotic. None of them require a specialist firm or a six-figure estate. They’re the result of drafting plans that don’t ask one question: how will this interact with the tax code and with Arizona-specific law when it finally comes time to use it?
A trust that doesn’t address community property is technically a valid trust. It just costs the surviving spouse real money down the road. A trust that’s never funded is technically valid too. It just doesn’t do its job.
Catching these costs nothing extra at drafting time. Asking about them is the whole reason we do a substantive consultation before quoting a price.
Common questions
Why does a tax-attorney perspective matter for estate planning?
Most estate planning attorneys focus on the document side: getting the trust drafted correctly, getting the will executed, getting the POA signed. A tax-attorney perspective also looks at how those documents interact with the income tax code, the estate tax code, and (in Arizona) community property rules. Small drafting differences can mean thousands of dollars in tax outcomes years later.
Are these mistakes only made by people who used DIY services?
No. Two of them I see most often in trusts drafted by traditional Arizona firms that just aren't paying attention to the tax angle. DIY services miss them too, but so do plenty of full-fee firms. The fix is asking the right questions at drafting time.
How do I know if my existing estate plan has any of these issues?
Bring it to your consultation. We do an existing-plan review as part of the free 30-minute call. We'll flag anything we'd recommend tightening. There's no obligation to engage us for the fix; some clients use the review to take corrections back to their current firm.
What's the most common tax-related mistake on this list?
Mishandling community property in a married couple's trust. Arizona is a community property state, and a properly drafted trust captures a full step-up in basis on community assets at the first spouse's death. A trust that treats community property as separate property loses that. For a long-owned, appreciated home, that's real money.
Educational only. Not legal or tax advice for any specific situation. Tax law and Arizona statutes change; consult a licensed attorney for your specific circumstances. Reading this article does not create an attorney-client relationship.