Avoid Multi-State Probate Pitfalls with a Comprehensive Estate Plan

Traveling between New York and New Jersey is a routine matter for many local residents. It’s even common to live in one state and work in the other. With this frequent movement between states, it’s easy to forget that they’re two entirely different jurisdictions with different laws and different court systems. When a decedent was a resident of one state and owned property in the other, it may mean a more complicated, time-consuming, and expensive probate process for heirs of the state.

Posted on June 26, 2017

This complication isn’t specific to the New York / New Jersey relationship. Area residents who own vacation or retirement property in another state, such as Florida, face similar challenges.

Multi-State Probate

When a person whose property is all within his or her state of residence passes away, the probate court has jurisdiction over the full estate. Whether the decedent left a will or died intestate, the estate is submitted to probate in his or her home state. Then, all creditor claims, distributions to heirs, and associated business is handled through that probate case. However, many people don’t realize that a New Jersey probate court has no jurisdiction over a New York condominium or a Florida retirement property. When an estate includes property in other states, the personal representative of the estate will be obliged to open probate proceedings in each of those states.

Unless the law firm handling the local probate has attorneys who are also licensed in the other jurisdiction, this will generally also mean retaining separate counsel in each state where the decedent held property. Retaining multiple attorneys means greater expense to the estate. The process may also be burdensome for the personal representative, who has to coordinate two, three, or even more separate probate processes.

Avoiding Multi-State Probate

Fortunately, good estate planning can protect your heirs from this type of complication, even if you own property in multiple states. If you pass your property through a will or die intestate, the estate will be submitted to probate, triggering the multi-state requirement if you own property outside your home state. However, inheritance is not your only option for passing property on. If you own property in two or more states, discuss these options for avoiding multi-state probate with your estate planning attorney.

Placing Property in a Living Trust

The most common and comprehensive way to avoid multi-state probate issues is to place the property in a living trust. The living trust may contain only the out-of-state properties, or may serve as a vehicle for all of the property that would otherwise make up the estate.

When you place property in a living trust, title to that property passes to the trust. During your lifetime, you serve as the grantor, trustee, and beneficiary. In practical effect, that means that little changes compared with when you personally held title to the property. You use trust assets for your own benefit, just as you did before the trust was created, and can freely buy and sell property and otherwise make use of the trust assets. Since the trust owns the property, it doesn’t become part of your estate. Instead, it remains in the trust, meaning that there’s no need for probate. A successor trustee of your choosing takes over managing the trust, and makes distributions to or on behalf of your beneficiaries per the instructions you built into the trust documents.

Joint Ownership of Property with Rights of Survivorship

Some types of property may be jointly titled to you and another person in such a way that when one of you passes away, the property passes to the other as sole owner. The type of property that may be held jointly with rights of survivorship and the people with whom you may hold property in this manner vary from state to state. One common example is when a husband and wife hold the marital residence as “tenants by the entirety,” ensuring that the surviving spouse automatically receives the property.

Similar rights of survivorship may be available for joint bank accounts and vehicles that are jointly titled.

Talk to An Estate Planning Attorney about Your Out-of-State Property

If you hold property in more than one state, educate yourself about your options. Talking with an attorney experienced in multi-state estate issues will allow you to protect your heirs from unnecessary stress, expense, and complications.

 

 

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