Owning real estate such as vacation homes, rental properties, or future retirement residencies play an important role when estate planning. But, if these properties are across multiple states, there may be issues in planning that can be easily overlooked. Your heirs may even face consequences if these issues are not handled properly.
Multiple Properties Can Result In Multiple Probate Proceedings
Probate is a court-supervised administration of your estate. If real estate is titled in your name, that property generally must go through probate in the state where it’s located.
If probate proceedings are required in multiple states, the process can become expensive. For example, your representative will need to engage a probate lawyer in each state, file certain documents in each state, and comply with other redundant administrative requirements.
Beyond cost and inconvenience, multiple probate proceedings can slow the transfer of property. This can create uncertainty for beneficiaries who need access to or control over the real estate.
A Revocable Trust Can Help Avoid Probate
A common strategy to avoid probate — especially for individuals with property in multiple states — is to transfer property to a revocable trust (sometimes called a “living trust”). When it comes to real estate, this generally involves preparing a deed transferring each property to the trust and recording the deed in the county where the property is located.
Property held in a revocable trust generally doesn’t have to go through probate. The reason is that the trust owns the property, not you. Your trustee manages or distributes the property according to the terms of the trust, without court involvement. A single revocable trust can hold real estate located in multiple states, potentially eliminating the need for separate probate proceedings in each jurisdiction.
Planning Ahead Makes A Difference
While a revocable trust can be an effective solution, it must be structured and maintained correctly to achieve the intended results. Titling, state-specific rules, and coordination with the rest of your estate plan all matter.
For example, will transferring a residence to a trust affect your eligibility for homestead exemptions from property taxes or other tax breaks? Will the transfer affect any mortgages on the property? Will it be subject to any real property transfer taxes? It’s also important to consider whether transferring title to property will affect the extent to which it’s shielded from the claims of creditors.
Review Your Properties & Your Estate Plan
If you own — or are considering purchasing — real estate in multiple states, be sure to review how that property fits into your overall estate plan. We can help assess the financial and tax implications and work with your legal advisors to help ensure your plan supports your long-term goals and protects your family.
