ADVERTISING: ADVERTORIAL - Ancillary probate: The extra probate most people don't see coming

Most people who plan their estates understand that probate is the court-supervised process for transferring assets after someone dies. What they often don't realize is that probate happens state by state. If you live in Idaho but own real property somewhere else — a vacation cabin in Montana, a rental in Arizona, a lake lot in Washington — your family may have to open multiple probates after you die. The additional ones are called ancillary probates.

What Ancillary Probate Actually Is

A "primary" or "domiciliary" probate is opened in the state where you lived at the time of your death. That proceeding handles your personal property and any real estate located within that state. But real estate is governed by the laws of the state where it sits. An Idaho probate court has no authority to transfer title to a cabin in Montana, no matter how clear your last will and testament is about your instructions.

To move that out-of-state real estate to your heirs, your family has to open a separate probate proceeding — the ancillary probate — in the state where the property is located. They'll typically need to hire a local attorney in that state, submit your Idaho probate documents for recognition, and follow that state's procedures from start to finish.

Is It a Problem?

Often, yes. The exact burden depends on the state, but the recurring problems are:

• A second attorney in a second state. Local counsel (and the costs to hire him or her) is almost always required.

• A second filing fee, and a second set of court costs.

• A second timeline. Some states have probate processes that move much slower than Idaho's.

• A second set of creditor notice periods before the property can be sold or distributed.

• Coordination headaches between two courts, two attorneys, and two sets of rules.

For a modest vacation property, the ancillary probate can sometimes cost more than the property is worth in family enjoyment that year — and it can delay a sale your family was counting on.

How to Avoid It

The good news is that ancillary probate is almost entirely preventable with planning. The most common solutions:

A revocable living trust. If the out-of-state property is titled in the name of your trust, it isn't owned by you at death — it's owned by the trust. No probate, primary or ancillary, is needed to transfer it. For clients who own real estate in more than one state, this is by far the cleanest fix and the reason many of them choose a trust-based plan in the first place.

A transfer-on-death deed. Some states, allow you to record a deed that automatically transfers real estate to a named beneficiary at death without probate. Not every state recognizes them, so this only works if the state where the property sits has its own TOD deed statute. And, this option is not nearly as flexible as using a living trust – since a trust allows you to create rules and provisions that need to be followed before the real estate can be transferred to the beneficiary, or what to do if the intended beneficiary is not alive – TOD deeds do not offer that level of detailed planning.

An LLC or other entity. Holding the property inside an LLC converts the asset from real estate into a membership interest — which is personal property governed by the state of your residence. This adds some complexity and ongoing costs, so it usually only makes sense for rental or investment property where you also get some additional liability protection from this approach. Your attorney can help you decide if this option makes sense.

Joint ownership with right of survivorship. Adding a co-owner with survivorship rights causes the property to pass automatically at death to the surviving owner. It avoids ancillary probate but creates other risks — exposure to the co-owner's creditors, loss of the step-up in basis on their half, and gift tax issues. The tax downsides alone on this option mean that it is rarely the best tool.

The Takeaway

If you own real estate outside Idaho, your estate plan needs to address it specifically. A well-drafted will alone won't prevent ancillary probate; it only directs how the ancillary probate ends. The time to fix this is now, while a revocable living trust can spare your family a second courthouse in a state they may not even live in.

My law firm is currently offering free telephonic, electronic, or in-person consultations concerning probating estates or creating estate planning documents.

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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 Kootenai Law at 208-765-6555, [email protected], 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.