Estate planning should detail the transfer of ownership of all property, including homes in addition to the primary residence. When the location of vacation homes or second properties is outside the owner’s state, the process can be more complicated.
When creating an estate plan, it is necessary to review the options for out-of-state properties to avoid unnecessary challenges.
Leaving out-of-state property in a will can lead to ancillary probate
One option for estate planning is a will, which documents the testators’ expectations of managing their property after their death. When testators own property in multiple states, they use one will for all their possessions.
Upon death, beneficiaries open probate cases in the state where their relative lived. Since each state has different laws regarding taxes and inheritance, the beneficiaries might also need to file additional claims, referred to as ancillary probate, in every state containing property. Each case may require beneficiaries to hire local lawyers or appoint stand-in executors, demanding extra time and financial resources.
Living trusts offer a simpler solution
People with property in multiple states may want to consider another option: a living trust. Instead of keeping the property in their name, they transfer ownership to the trust. This type of trust is flexible, and owners can move property in and out of it at their leisure. When they die, the trust becomes permanent.
The advantage of this option is a trust does not require probate or estate taxes. The successor trustees manage and distribute property according to the trustees’ designations regardless of location.
By considering various options for estate planning with out-of-state property, testators can choose the best plan for their beneficiaries.