If you own real estate when you die, it is most likely your estate will be required to go through probate. This can take months to years and becomes expensive, as explained in the article “Why a trust is so useful for those who own real property in multiple states” from Coeur d’Alene/Post Falls Press. However, here’s the thing to be aware of: if you own property in more than one state, your estate must go through the probate process in every state where you own property. Trusts can work very well for multi-state property owners.
A few strategies must be considered for snowbirds with homes in northern and southern regions or who own out-of-state rental property.
Some families will add an intended heir to the title (deed) of the real estate while the primary owners are still living. This is rarely recommended, since it can open the door to any number of problems. If the intended heir has a financial crisis, like a lawsuit, divorce, creditor issues, etc., the jointly owned property is an attachable asset.
Another solution people try is the “Pay on Death Deed.” This is a special type of deed where the recipient gets the real property on the death of the owner. This strategy has a few problems. However, the main one is that not all states allow these types of deeds to be used.
An experienced estate planning attorney will know whether or not your state allows the Pay-on-Death-Deed.
The best solution for most people owning property in multiple states is using a living trust.
The living trust provides the same directions as a last will and testament about who should receive what assets from your estate after your death, including real property. It also names a trustee, who manages the assets in the trust and distributes them after your death.
A key reason to use a living trust is the assets owned by the trust are outside of the probate estate. These assets pass to beneficiaries according to the terms of the trust and do not go through the probate process.
Once the living trust is established, the trust may hold title to any real property, regardless of where the property is located. The trustee does not have to deal with the courts in multiple states.
There is a tendency to think trusts are only used by the very wealthy. However, this is not true. Anyone who owns real property and doesn’t want it to go through one or more probate proceedings benefits from using a trust.
Trusts can work very well for multi-state property owners. An experienced estate planning attorney can establish the trust and guide you through putting assets into the trust. If you would like to learn more about managing real property in an estate plan, please visit our previous posts.
Reference: Coeur d’Alene/Post Falls Press “Why a trust is so useful for those who own real property in multiple states”
Image by F. Muhammad
