FAQ: How are estate assets valued when calculating a surviving spouse’s statutory elective share in AZ?

Short answer: In Arizona, the elective-share calculation normally uses the fair market value (FMV) of the decedent’s included assets as of the date of death (or another valuation date allowed by law), adds certain nonprobate transfers into an “augmented estate,” and then reduces that total by debts, funeral and administration costs, and other allowable deductions to reach a net augmented estate. The surviving spouse’s share is then computed from that net figure. Different asset types (real property, business interests, retirement accounts, life insurance, jointly held accounts, and gifts/transfers made before death) have special valuation rules or practical valuation methods that affect the result.

Detailed answer — what Arizona law looks at and how assets are valued

Arizona law treats a spouse’s elective share through an “augmented estate” concept that brings together the probate estate plus selected nonprobate transfers to determine how much the surviving spouse may elect to claim. For an overview of Arizona probate statutes (Title 14), see the Arizona Revised Statutes, Title 14 (Probate): https://www.azleg.gov/arstitle/14/.

Key valuation principles you should expect to see applied when the elective-share calculation is made:

• Valuation date — usually date of death. Most assets are valued at their fair market value on the decedent’s date of death. FMV is what a willing buyer would pay a willing seller in an arm’s-length transaction. Some statutes or probate practice permit an alternate valuation date in limited circumstances, but the common and practical rule is to use the date of death value.
• Probate assets. Assets that pass under the will or by intestacy are valued at FMV on the date of death (real property at FMV less encumbrances to reach net equity; personal property at FMV; cash at face value).
• Revocable trusts and transfers with retained control. Assets held in a revocable trust or transferred during life but subject to the decedent’s control or right to revoke are typically included in the augmented estate at FMV on the date of death.
• Nonprobate transfers that may be included. Joint accounts, transfer-on-death/payable-on-death accounts, beneficiary-designated assets, and certain inter vivos gifts or retained-interest transfers can be brought into the augmented estate. These are normally valued at FMV on the date of death (or according to the statute’s rule for valuing that type of transfer).
• Life insurance and retirement accounts. The treatment depends on who the beneficiary is and whether the proceeds were payable to the estate or to a third-party beneficiary. A policy that pays to the estate or to no named beneficiary will usually be included at the face amount (or FMV of the policy) in the augmented estate. Retirement accounts and IRAs often are included at their account balance or FMV at date of death; actuarial valuation may be needed where future payments or income streams are involved.
• Joint tenancy and community property. Arizona is a community-property state. Where property is community property, each spouse already owns a share, and that ownership affects what is counted in the augmented estate. For jointly held property titled as joint tenants with right of survivorship, courts and practitioners typically look at the presumption of contribution and intent — the portion attributable to the decedent may be included and is usually valued at FMV on the date of death (the surviving joint owner’s presumed share is excluded because it already belongs to the survivor).
• Gifts and transfers before death. To prevent avoidance of the elective share, many statutes include certain lifetime gifts and transfers made in a look‑back period or transfers where the decedent retained benefits. Those transfers are typically valued either at the date of gift or at the date of death, depending on the statute and the type of transfer. Expect the probate process to examine recent large gifts or transfers into trusts.
• Debts, funeral, administration costs and taxes. After grossing up the augmented estate, allowable deductions (decedent’s outstanding debts, funeral and burial expenses, estate administration costs, and sometimes estate or inheritance taxes) are subtracted to arrive at the net augmented estate used for the spouse’s share calculation. Debts are usually deducted at amounts owed as of the date of death or as allowed under probate administration.
• Business interests and closely held assets. Valuation of closely held business interests, partnership interests or privately held stock generally requires an appraisal or expert valuation to determine FMV as of the date of death. Courts look for fair market value, not book value or hypothetical liquidation value, unless the asset will be liquidated.
• Discounts and special valuation rules. Some assets may warrant discounts (lack of marketability, minority interest) when valued for FMV. Trust provisions, buy-sell agreements, or restrictions on transfer can affect FMV and should be considered in the valuation.

Step-by-step practical approach (typical)

1. Inventory all assets and classify them: probate assets, revocable-trust assets, beneficiary-designated assets, jointly held property, life insurance, retirement accounts, recent gifts or transfers.
2. Obtain FMV for each included item as of the date of death. Use appraisals for real estate and businesses; use account balance statements for bank and retirement accounts dated at date of death; use insurer statements for life policies.
3. Include the values required by statute to make up the augmented estate (this is where nonprobate transfers and certain gifts are added back in).
4. Deduct debts, funeral/administration expenses, liens, and any taxes allowed by the statute to reach the net augmented estate.
5. Compute the surviving spouse’s statutory share based on the statutory formula in Arizona law.
6. Adjust for any credits or setoffs (for example, the spouse’s existing ownership interest in community property or assets already received from the decedent).

Hypothetical example (illustrative only)

Suppose a decedent’s probate estate is $300,000 in cash and personal property, a revocable trust holds $150,000, a bank account titled jointly with a child is $40,000 (decedent contributed $20,000), life insurance payable to the estate is $100,000, retirement accounts total $200,000, and debts and funeral expenses total $100,000.

Step 1 — add included assets at FMV (date-of-death): $300,000 + $150,000 + $20,000 (decedent’s portion of the joint account if includable) + $100,000 + $200,000 = $770,000 gross augmented estate.

Step 2 — subtract $100,000 debts/expenses to reach a net augmented estate of $670,000.

Step 3 — apply the statutory percentage or formula to that net augmented estate to determine the spouse’s elective share (the actual percentage and adjustments are set by statute and case law).

This example illustrates valuation at date of death and the general add-back/deduction approach. The real calculation will vary depending on which nonprobate items Arizona law requires to be included and what credits or offsets the surviving spouse already has received.

When to get professional valuations

• Real estate and commercial real property almost always need a certified appraisal.
• Closely held businesses and partnership interests require a business valuation expert or CPA forensic valuation.
• Retirement income streams or pensions may require actuarial valuation to convert future payments into a present value.
• Life insurance policies sometimes need to be valued at either cash surrender value (if applicable) or face amount depending on who is the beneficiary and whether proceeds pass to the estate.

Helpful hints

• Gather complete documentation: title documents, account statements dated at death, trust documents, beneficiary designations, life-insurance policies, loan statements, tax returns, and any buy-sell or shareholder agreements.
• Get timely appraisals for real estate and business interests; delays can complicate arguments over FMV.
• Be aware Arizona is a community-property state — discuss with an attorney how community property ownership changes what the surviving spouse already owns versus what must be included in the augmented estate.
• Watch for large pre-death gifts or transfers into trusts; these may be pulled into the augmented estate depending on the statute and facts.
• Keep clear records of contributions to jointly held accounts to show the decedent’s share versus the co-owner’s share.
• If the estate includes unusual assets (cryptocurrency, fractional interests, intellectual property), expect specialized valuation methods and experts.
• Statutory detail and deadlines matter. Consult an Arizona probate attorney early to preserve rights and meet any election time limits.

Where to read the law: See Arizona Revised Statutes, Title 14 (Probate) for the probate and elective-share framework: https://www.azleg.gov/arstitle/14/. A probate attorney can point to the exact sections and cases that apply to your facts.

Disclaimer: This information is educational only and not legal advice. It summarizes general principles about valuation in elective-share calculations under Arizona law. Laws change and every case turns on its facts. Consult a licensed Arizona probate attorney to get advice tailored to your situation.