Arizona homeowners face a difficult dilemma when planning their estates. They want to secure their family’s future by placing their home in a trust, yet they fear that doing so might forfeit their homestead exemption.
Under A.R.S. § 33-1101, as of January 1, 2025, Arizona’s homestead exemption shields up to $425,200 of home equity from certain creditors, with annual adjustments for inflation. However, rumors persist that transferring a home into a trust means losing the exemption. While A.R.S. § 33-1104 clarifies that not all transfers result in abandonment, uncertainty lingers, leaving many homeowners torn between safeguarding their assets and getting their affairs in order.
How to Abandon a Homestead
According to A.R.S. § 33-1104(A), a homestead may be abandoned in three ways:
- A declaration of abandonment or waiver (which must be recorded).
- A transfer of the homestead property by deed or contract for conveyance.
- Permanent removal from the residence or state (though temporary absences of up to two years are permitted).
Exception for Transfers to Revocable Trusts
While A.R.S. § 33-1104(A)(2) states that a transfer generally constitutes abandonment, subsection E creates an exception:
” Notwithstanding the provisions of subsection A, paragraph 2 of this section, a transfer of the homestead property by deed of conveyance or contract for conveyance under a trust, as defined in section 14-1201, in which the claimant retains the power to administer and revoke the trust shall not constitute an abandonment of the homestead. ” Emphasis added.
This means that if a homeowner transfers their homestead property into a revocable trust while maintaining control, the homestead exemption remains intact.
Practical Implications for Homeowners
Homeowners often use revocable living trusts for estate planning, allowing for a smoother transfer of property upon death while avoiding probate. If the transfer is into a revocable trust, the homestead protection remains in place—offering security to the homeowner while ensuring the property is properly structured for estate planning purposes.
Conclusion
Arizona law does not automatically strip a homeowner of homestead protection simply because the property is transferred. If the transfer is into a revocable trust where the owner retains control, the exemption remains intact. Given the complexities of homestead laws and estate planning, working with an experienced Arizona attorney can help homeowners navigate these issues effectively.
Disclaimer: Laws change constantly. Specific legal advice should be obtained regarding any legal matter. The information contained on this website does not constitute legal advice and no attorney-client relationship is created.
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