Estate Planning with Property in Multiple States

August 14, 2021

Settling affairs after you’ve passed can become a lengthy and expensive probate process for your family. As a solution to this problem, HereToday’s platform enables you to safeguard your estate plans and other pertinent files in a single location; as well as release these documents to an executor and beneficiaries at the appropriate time. A critical element of estate planning is documenting your property. In our blogThe Importance of Defining Propertywe explored the definition of property, where we state “property encompasses all of your assets when discussing the term within the context of estate planning. Property does not solely mean real estate holdings; but rather it includes both real property (real estate) and personal property.” While most people have property in a single location, some individuals have property in multiple states. This scenario can be challenging, but early preparation can help your executor avoid probate court. 

The Basics: What’s an Estate Plan?

An estate plan is a document that lists beneficiaries and what assets they will inherit upon your death. Whether you’re a CEO or an hourly wage earner, you need to plan for the inevitable. The main goal of an estate plan is to protect your loved ones. An estate plan succinctly outlines your wishes, what assets you own, and where you want these items transferred upon passing. Everything from your home and car, investments, artwork, heirlooms, and digital assets need to be designated to your heirs.

A well-crafted plan will minimize your estate’s taxes and easily guide the transfer of property to your beneficiaries. Additionally, an estate plan can strategically prepare you and your family for any long-term health care expenses you might incur. All of these elements will be clearly outlined in your plan, which will reduce the stress and anxiety your executor might experience when they’re called upon to manage the estate.  

Estate Plan Documents

  • Will
  • Durable General Power of Attorney
  • Healthcare Power of Attorney
  • Advance Medical Directive
  • Trusts

If you’re passing down property owned in multiple states, your beneficiaries can experience some challenges; including property transfer delays or even unexpected tax obligations. However, a well structured estate plan can minimize these complications. We recommend an estate planning attorney prepare your documents.  

Ancillary Probate – Properties in Multiple States

In the situation where you own property in multiple states, each state’s probate court will only have authority over property in that state. Probate in multiple states is called “ancillary probate.”

Upon your passing, an executor will begin probate in your state of primary residence. This is known as “domiciliary administration” because it takes place where you made a permanent home. A second probate case, or ancillary probate, will be opened in the location where other out-of-state real estate is located. Typically, once the state of primary residence has accepted your will in probate court, other states will accept your “foreign will.” A foreign will is a last will and testament that was executed in another state.

As an example, if you’re a California resident and own property in San Francisco, the California probate court will supervise the property’s transfer. However, if you also have property in Arizona or Oregon, these properties will have to be transferred through an ancillary probate process in these states. In some cases your executor might have to travel to each location; as well as hire a local attorney.  

How to Avoid Ancillary Probate

As you can imagine, an ancillary probate for your executor requires significantly more work and expense. Here’s three ways to minimize the executor’s resources and avoid probate court. 

  • Right of Survivorship. Ensure a property deed lists your spouse / partner as a joint owner. A right of survivorship means the property will pass directly to your spouse and avoid probate. 
  • Record a transfer-on-death deed for the property.
  • Revocable Living Trust. Take advantage of establishing a revocable living trust. Properties placed within the trust will pass to beneficiaries based upon the instructions in the trust. In doing so, your estate will avoid probate; but also a trust can help minimize state estate taxes. 

There’s always an exception to a rule. If your estate has personal property in another state, like furniture or other personal belongings, your executor should be able to move the property to your home state; where the collective estate will go through probate. 

Benefits of a Trust

With properties in multiple states, a trust is a good way to handle out of state property. Additionally, with powers of attorney and advance directives, it is advisable to consider separate documents for each state where you spend any prolonged periods of time. Each document should be tailored to the particular state’s laws and its preferred legal format; in doing so, you eliminate any confusion that might arise among healthcare professionals and your wishes. 

Preparation and Guidance

HereToday’s family preparation and guidance document provides additional information and checklists about estate planning. Whether you own property in a single location or multiple states, a well structured estate plan is critical. Take advantage of your time and the opportunity to put an estate plan in place today. 

 

Disclaimer. HereToday is not a legal service. This content should not be taken as legal advice. Before drafting any legal document, please consult an attorney.

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