Is This Your Situation: Bestowing Property in Different States
In this life, owning property in more than one state — such as a vacation beach house just over the state border from your principal residence — is a dream come true. But when you die, owning property in multiple states can cause probate headaches for your heirs.
What’s the probate problem?
During probate, courts change the title of property from the dead person’s name to their heirs’ names. Typically, the process takes one to two years, during which time all the assets in the will are frozen.
When you own real estate in multiple states, your heirs must go through probate in each state, because real estate is governed by the state in which the property is located, not where the owner lives. It’s called “ancillary probate,” and it adds time to the already time-sucking probate process.
Say you live in Virginia but own a mountain retreat in West Virginia and a timeshare in Florida. Upon your death, the executor of your estate will have to open probate in all three states, and your estate must pay probate and attorney fees (likely) in each place.
Estate planning can help
Your heirs can avoid ancillary probate if you do some smart estate planning now.
Joint ownership: Owning property with someone else can avoid probate because when one owner dies, the property title automatically passes to the surviving owner. The downside of this strategy is that you’re giving away partial ownership and total control of a property, and you can’t take it back. Also, you may have to pay a gift tax on the part of the property you give away.
Revocable living trust: Any real estate or material property you put in a revocable living trust is no longer considered part of your estate and is not subject to probate in any state one or several states. Plus, you can add to or subtract from the trust — or even cancel the trust — any time you want.
The trick with living trusts is to make sure you transfer property into the trust before you die. People tend to put off this paperwork, which raises the odds that they’ll drop dead before funding the trust.
Owning multiple properties may be a blessing in life, but can be difficult to probate after you die. Give us a call, and we’ll help you plan an estates that will sail through probate — or avoid it altogether.