As a California Estate Planning attorney, I often have clients who own property in other states. Whether it's a vacation home in Nevada, a rental property in Arizona, or farmland in Texas, out-of-state property can complicate your estate planning if not handled correctly. Failing to properly address these assets in your plan could result in costly and time-consuming legal proceedings for your heirs. Let's discuss the best practices for incorporating out-of-state property into your estate plan.

Why Out-of-State Property Needs Special Attention

When you own property in a different state, it is subject to the laws of that state. This can create complications when settling your estate. For example, your beneficiaries may need to initiate an ancillary probate proceeding—a secondary probate case in the state where the property is located. Ancillary probate can be costly, time-consuming, and stressful for your loved ones.

To avoid these issues, it's crucial to proactively include out-of-state property in your estate plan.

Options for Addressing Out-of-State Property

Here are some common strategies for managing out-of-state property in your estate plan:

1. Transfer the Property to Your Trust

The simplest way to avoid ancillary probate is to title your out-of-state property in the name of your revocable living trust. By transferring ownership to the trust, you ensure that the property is governed by the terms of the trust rather than requiring a separate probate process in the other state. This is especially effective if you already have a trust in place for your California assets.

2. Use a Limited Liability Company (LLC)

For rental or investment properties, creating an LLC and transferring the property to it can be a practical option. You can then assign the ownership of the LLC to your trust. This method not only avoids probate but may also offer liability protection and other tax benefits.

3. Consider a Deed with Transfer-on-Death (TOD) Designation

Some states allow you to execute a Transfer-on-Death Deed for real property. This type of deed names a beneficiary who will automatically receive the property upon your death, bypassing probate. However, not all states permit TOD deeds, so it's important to confirm whether this is a viable option in the state where your property is located.

4. Consult with Local Counsel

Each state has its own property laws, so consulting with an attorney licensed in the state where your property is located is essential. They can help ensure that your estate planning documents comply with local laws and effectively achieve your goals.

The Importance of Coordination

It's critical that your estate plan accounts for all your assets, including out-of-state property. Make sure your trust, wills, deeds, and any LLC or TOD designations are coordinated to prevent conflicts or oversights. Regularly review your plan with your estate planning attorney to ensure that it reflects your current assets and intentions.

Final Thoughts

Addressing out-of-state property in your estate plan may seem daunting, but the right strategies can simplify the process and provide peace of mind. By transferring the property to your trust, considering LLCs or TOD deeds, and consulting with local counsel, you can ensure that your loved ones avoid unnecessary legal hassles and expenses after your passing.

LEGAL DISCLAIMER

This article is intended for general information purposes only. Any legal analysis or other content should not be construed as legal or professional advice or a substitute for such advice. No attorney-client or confidential relationship is formed by the transmission of this information. If you require legal or professional advice, please contact an attorney or other suitable professional advisor. The choice of an attorney or other professional is an important decision and should not be based solely upon advertisements and blog postings.