Inheriting property out of state will require extra steps before you can take over that property – whether you plan to live in it, rent it, or just sell it. There are ways to help loved ones avoid these issues if you plan to give an inheritance to someone out of your state, and knowing your options can help save time and money for everyone involved.
It is not uncommon to have family members out of state, and there is likely a loved one you could have inherit real estate in your state while they are living in another. Whether it is your primary residence, a rental property, or a vacation home, you want to be prepared for how to give away that real estate or receive that real estate when the time comes.
Bottom Line: You Will Have to Go through Probate
When a person dies and they have out-of-state assets, then those portions of the estate must go through probate in the state where they reside – no matter where the beneficiary lives. This process is known as ancillary probate, which means that it is probate in addition to the main probate proceedings in the deceased’s home state.
For example, you have a loved one that resides in New York and they had a rental home in New Jersey that they left to you as part of your inheritance. The primary probate is opened in New York, the primary residence of the deceased, but the ancillary probate opens in New Jersey to cover that out of state property.
Do All Out-of-State Properties Go through Ancillary Probate?
The state where the property is, the size of the estate, and where beneficiaries are located will all play a role in the ancillary probate process. Most states have a minimum estate amount for probate, but even with simplified probate, the process will happen regardless. Ancillary probate is very time consuming, and it quickly becomes expensive for the estate itself. Not only does the executor need to hire an attorney in the other state to assist them, but the law might require that the executor hire an agent in that state as well-meaning an executor for that state’s property.
What If There Are Multiple Properties in Multiple States?
When there are multiple pieces of real estate in various states, the issues become even more complicated.
For example, the deceased lived in New York. They have their vacation home in New Jersey, but they have a rental condo in Florida too. They also have a timeshare in Colorado. The beneficiary for these properties lives in California. That resident of California will now be juggling multiple probate processes. Not only are they dealing with the main probate in New York, but all ancillary probates in the other states where the other properties are located.
This becomes incredibly expensive for the beneficiary. They could require attorneys in each state, they may have to travel for each probate procedure, and still have to be able to schedule these proceedings together to complete along with the main probate proceeding.
How to Avoid Out-of-State Ancillary Probate
You can avoid the entire process of ancillary probate, and if you have multiple residences out of state, you should consider these options to save your loved ones the hassles of dealing with multiple probate proceedings at once – along with the cost that comes with it.
Placing Real Estate in a Trust
Regardless of the state where the real estate is, that property can be placed into a trust, which means that ancillary probate is no longer necessary. In a trust, you take property that you own and you transfer it from your name to the trust – essentially making the trust the official owner of that property, but you control it through your trust.
You can revoke that trust at any time, as long as you are found competent to do so. After your death, if you have not revoked the trust, then it becomes irrevocable. That means that the person you name as your beneficiary in the trust will automatically receive the property from that trust upon your death – without probate court involvement.
How Does a Trust Work for Property in Another State?
Using the same example of where the deceased lived in New York but has property in New Jersey, we can show you how a trust simplifies the process of passing along that vacation home in New Jersey to a beneficiary.
When the New York resident dies, the successor of the trustee (which may be the beneficiary of the home or someone else) will then take over the management of that trust. Following all instructions in the trust documents, they will distribute the property in accordance with those instructions to the named beneficiaries. Courts are not involved. Therefore, the New Jersey home would automatically transfer to the beneficiary, just as the primary residence in New York would.
Most importantly, other assets may be placed in that trust too, which means those assets will be equally distributed without any probate court interference.
Even if there are multiple homes in multiple states, you completely remove the need for ancillary probate just by transferring all of those properties into a trust. No hiring attorneys out of state, dealing with court fees and special executor rules for each state, and no dealing with the cost of traveling to each one. Instead, everyone receives their inheritance, the property is closed out, and family members can move on.
Create a Trust for Your Out of State Property Now
If you want to save your loved ones the hassle of trying to acquire their inheritance from another state, then now is the time to act. You can set up an irrevocable trust with your properties, no matter what state they are in, so that your loved ones do not have to deal with probate or ancillary probate proceedings.