Estate Planning When You Own Property In Different States

Many of my clients own property in more than one state.  They may have condos in a large city where they once lived which they now rent.  Some own vacation houses some place warm and lovely.  Others simply have real estate investments across multiple states.  Whatever your circumstances, if you own property in more than one state, you will be subject to “ancillary probate” when you die unless you have an estate plan in place that avoids this process. 

Typically, when the average person dies, their estate goes through probate in the state where they live.  Probate is the process in which a court supervises the distribution of a person’s estate:  attorneys must be hired, executors must be appointed, assets must be identified and valued, creditors notified, bill and taxes paid, and assets distributed to beneficiaries.  However, if a person owns real estate in multiple states, a probate proceeding has to be filed in every state in which they own property. 

As you might imagine, this can be a huge headache for their heirs.  Attorneys have to be found and hired in every state, and attendance may be required at court hearings in multiple locations.  In addition to the administrative hassle, however, are the significant costs involved.

Unsurprisingly, much of the cost comes in the form of attorney’s fees.  In Idaho, it typically costs $3,000 to $5,000 in attorney’s fees to probate an estate.  However, other states have much higher mandatory fees.  California is one of the most expensive states.  For example, in California, it costs $34,000 to probate a home worth $700,000.  In Florida, probate costs are $3,000 plus 3% of the value of the estate between $100,000 to $1,000,000.  So, a $700,000 house in Florida will cost $24,000 to probate.

You can see how costs can quickly add up!  Fortunately, all of these costs and hassles can be avoided with thoughtful estate planning.  If you create a living trust and transfer all of your real estate holdings, wherever they are located, into your trust, you can avoid ancillary probate.  In fact, by placing all of your assets into a living trust, you can avoid probate all together and ensure your estate will be distributed in an expeditious and cost-effective way.
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