Planning for Property Outside of California
I’ve written before about the high costs of probate in California. In terms of both time and money, it’s a process that most people want to avoid. But for people who own real property in multiple states, avoiding probate can be even more important. That’s because estates with real property in multiple states may need multiple probate administrations—one in each state where that property is located. In this post, I want to explain why that is and what can be done to avoid it.
What Happens with Property in Other States?
Regarding real estate, a state’s courts only have probate jurisdiction over real property located within that state. So, California courts cannot exercise probate jurisdiction over real property in, say, Arizona or Nevada. Consequently, if you own real property in multiple states, and you don’t have an estate plan that removes those assets from the probate process, your loved ones may have to open a separate probate administration in each of them, even if you have a will that says what’s supposed to happen to that property. So, for every state other than California where you own real property, your loved ones will have to hire a local attorney and go to court. If you think going through probate in one state is burdensome, imagine having to do the same thing multiple times!
Proper Planning Can Avoid Multiple Probates
Fortunately, the same planning tools that you can use to avoid probate in California can also be used to avoid probate in other states. It takes more legwork upfront to plan for property in multiple states, but it will save your family a lot of trouble down the line.
Transferring real property to a living trust is an obvious option. If you do this, the property will pass according to the terms of the trust agreement, without having to open a formal administration in court. However, the rules for transferring real property varies by state, particularly when a trust is involved. So, proper planning requires that the proper steps be followed in each state to transfer that property to your living trust.
An alternative is to own the property in a business entity, like a corporation or limited liability company. If property is held in this way, ownership of the real property itself will not change when you die. Instead, it will remain the property of the business entity. The only question at that point will be who succeeds you in owning the entity. The answer to that question may be determined by the terms of a trust if the entity is owned by a trust, or California courts may be able to answer it in other cases.
In conclusion, if one of your estate-planning goals is to avoid probate, as it is for millions of other Californians, then owning real property outside of California makes proper planning even more urgent. If you find yourself in this situation, please call me to set up a consultation. I’ll be happy to discuss this topic with you in more detail and help you create a plan for all your property, wherever it’s located.