Estate planning helps to better ensure your wishes are carried out when you cannot handle your affairs. Those who are putting together an estate plan are wise to consider the various legal tools that can help achieve these goals. For those with more complex estates, this can mean a mix of legal tools. This is especially true for those who own real estate in multiple states.
Before finalizing a plan, consider the following potential implications:
State-specific probate
Each state’s probate court oversees property within its borders. If you live in Illinois and have not made plans to avoid probate, the estate will likely pass through the probate process in Illinois. If that same individual owns a Florida vacation property and does not take steps to proactive guide the transfer, it would likely fall into probate in Florida.
It is possible to reduce the risk of multiple probates. Legal strategies to help achieve this goal can include:
- Joint ownership: Property deeds that indicate joint ownership with your spouse and a right of survivorship are less likely to require probate when transferred to the spouse. This means the property passes directly to your spouse without probate or a specific gift in your will.
- Revocable living trust: Place real estate in a revocable living trust. The trust’s instructions can govern property distribution, bypassing probate. It is also effective for minimizing state estate taxes.
If you only have personal property (like furniture) in another state, your executor can usually move it to your home state for probate.
State estate taxes
Depending on the location of the real estate, the estate could owe state estate taxes. It is important to know the laws of the state to help better ensure your plan takes this possible cost into account. It is possible to use legal tools like trusts or business entities to help reduce this risk.
These are just a few of the considerations to take into account when putting together an estate plan. A failure to account for these potential issues can result in unnecessary and avoidable burden.