Owning Property in Two or More States can Complicate Estate Planning
| May 16, 2022 1:00 AM
I often meet with clients who own real property in multiple states. Maybe they are snowbirds with primary residence in Idaho, and winter property in Arizona, or California. Sometimes my clients own investment properties such as rentals in states other than Idaho. Whatever the case may be, owning real property in more than one state can be a problem after your death if you don’t want your estate tied up in probate court.
When a person owns real property at the time of his or her death, this fact alone will almost always mean that his or her estate will be required to go through a court-controlled process called “probate.” There are a very few exceptions to this, but most of the time probate will be necessary. Probate is not necessarily a bad thing, but it does tend to take a long time (think months to years, not weeks), and it can get pretty expensive between lawyer’s fees and court costs (think thousands, not hundreds). But here’s the rub: if the deceased person owned real property in more than one state, we must now go through the probate court process in every state in which the decedent owned real property. Did mom and dad own real property in three states? Well, then we are doing probates in all three states. Great for the attorneys; bad for everyone else.
There are multiple ways to try to avoid this outcome. Most of those methods have pros and cons. One method works very well almost every time.
One method to deal with avoiding probate when real estate is owned is to add the intended heirs to the title (the deed) of the real estate right now, while the primary owners are alive. This can be very problematic and is very rarely advised by attorneys. The primary reason is that the real estate is now co-owned by the intended heirs, and if the intended heirs get into financial trouble (bankruptcy, divorce, someone sues them, creditor issues, etc.) then the primary owners are now wrapped up in that financial trouble too. Mom and dad should not lose their home or investment property because son or daughter were sued by someone.
Another possible solution is something called a “Pay on Death Deed.” This is a special type of real property deed that names a recipient to receive the real property after the current owner dies. These also can have some drawbacks, but the primary reason they aren’t a perfect solution is that many states simply do not allow the use of Pay on Death Deeds. Idaho, for example, does not allow these types of deeds.
The best solution for this problem most of the time for most people, is to use a living trust. A living trust gives the same types of directions as a last will and testament regarding who should receive what from your estate after your death, and who should be in charge of carrying out the administration of your estate. However, a living trust does not have to be administered through the probate court system. Once a living trust is set up, the trust can hold title to any real property that you own in any state, and thereby eliminate the need for a probate court matter in any state, including your home state. Sometimes folks believe trusts are tools that only the very rich utilize, but as you can see here, anyone who owns real property and does not want their estate to go through one, let alone multiple, probates can potentially benefit from a living trust.
My law firm is currently offering free telephonic, electronic, or in-person consultations concerning creating or reviewing estate planning documents for people of all ages.
Robert J. Green is an Elder Law, Trust, Estate, & Guardianship Attorney and the owner of Kootenai Law Group, PLLC in Coeur d’Alene. If you have questions about estate planning, probates, wills, trusts, powers of attorney, guardianships, Medicaid planning, or VA Benefit planning, contact Robert at 208-765-6555, Robert@KootenaiLaw.com, or visit www.KootenaiLaw.com.
This has been presented as general information and not as legal advice. Do not engage in legal decision-making without the advice of a competent attorney after discussion of your specific circumstances.