Another Benefit of Trusts: Owning Real Estate in Multiple States
By: Barry E. Haimo, Esq.
March 26, 2015
There are many benefits associated with setting up a trust or estate administration, and avoiding probate is at the top of the list. Probate can be a costly, stressful, and time-consuming process, and one that many families are eager to avoid.
But if enduring probate proceedings on only one occasion seems unappealing, going through probate multiple times may seem like a nightmare. If you own real estate in multiple states, that is exactly what your estate will have to undergo without proper and careful planning.
Typically, out-of-state property that is owned solely in a decedent’s own name requires separate probate proceedings in the county where it is located, no matter what the will provides. Remember, a will merely provides instructions that are carried out in probate (also known as estate administration). That means your beneficiaries have to pay additional probate fees, and wait weeks, months, or even years before they are allowed to take possession of your out-of-state real property and exercise basic incidents of ownership.
Consider the case of the Burnet family, where a father’s simple living will and testament was not enough to spare his daughter from the complex, time-consuming, and expensive probate process.
Three Homes, Three Probate Proceedings/Estate Administrations
Jim Burnet thought his hometown of St. Petersburg, Florida was the most beautiful place in the world. It was St. Petersburg where Jim and his wife raised his daughter, Julia, and it was there that Jim worked hard to build his own real estate empire up from the ground.
Jim’s heart would always be in St. Petersburg, but when his wife died, he found it hard to spend too much time in their family home. Julia had moved out long ago, and now the house was empty save for reminders of the wonderful life he and his wife once shared.
That’s why Jim decided to buy a summer home in Michigan when he retired, where Julia and her new husband were just starting a family. When Jim’s aunt, who lived in New Mexico, grew ill, Jim bought a house in Santa Fe, so he could care for and visit his aunt during her final years.
Jim loved spending summers in his lakeside home in Michigan, and winters skiing in Colorado. And whenever he found himself missing warm weather and his beloved hometown, he could easily hop back down to his primary residence in Florida. Jim was very happy with the freedom his multiple residences afforded him, and was excited to be able to leave the wonderful properties to daughter. He was pleased to know that she’d be able to take his grandchildren on beautiful vacations around the country.
However, Jim’s estate planning consisted only of a simple will, which left his assets outright to Julia. She was left with the difficult task of initiating probate (or estate administration) in three states—Florida, Michigan, and Colorado. That meant dealing with a wide variety of notices, overseeing creditors’ claims, and taking inventory — in each place! There were so many complications and she was stretched so thin. In addition, she had to retain an attorney in each jurisdiction to administer the probate proceedings and transfer the real estate. The entire process of seeing the three separate properties through probate took over a year and a half as a result, and the family ended up having to pay a huge amount of attorney and administration fees.
After all was said and done, Julia was grateful for the wonderful homes her father had left behind for her, but resolved to plan her own estate more strategically so she wouldn’t leave her own children with the challenge of undergoing multiple probate proceedings. When Julia spoke to an estate planning attorney, he advised her to form a revocable living trust.
Avoiding Multiple Probate Proceedings with a Trust
Setting up a trust is an effective strategy for avoiding probate, and highly advisable for anyone who owns out-of-state properties. When you set up a trust, probate of the property in your trust after your death will not typically be required, since the trust effectively owns the property—not you. However, you’ll still have complete access to the property within the trust if structured properly.
Upon your death, your designated successor will become the new trustee. Since the property is still owned by the trust, probate will not be required, and the trust will continue along seamlessly and smoothly. Instead of a long and painful process, probate, legal, and administration costs are reduced, and your survivors are spared the hassle of undergoing multiple probate proceedings.
Of course, forming a revocable trust is just one of the many strategies available for helping you reduce complications, conflicts, and costs when estate planning for property in multiple states. To determine the best strategies for your unique estate, circumstances and goals, talk to an attorney with experience in probate and estate planning. Frequently, business entities in conjunction with trusts are employed. Your attorney may be able to help you transition your legal affairs, ensuring your estate planning documents meet your personal needs and achieve your goals in addition to meeting the requirements of other states.
Barry E. Haimo, Esq.