If you own real estate outside of California – maybe a cabin in Arizona, a rental in Nevada or a family home in another state – it’s worth asking one simple question: What happens to that property when I die?
Many Californians assume their will or trust automatically covers everything they own, everywhere. But real property is treated differently, and a little planning now can save your loved ones time, expense and frustration later.
Why out-of-state property is a special issue: Real estate is controlled by the laws of the state where it is located. So even if you live in California, a property you own in another state is governed by that other state’s transfer rules at death. This isn’t a problem; it’s just how property law works. The key is understanding how your estate plan interacts with those state-specific rules.
If you have a will, your family may face probate in two states. A will is an important document, but it does not avoid probate. If you die owning real property in your individual name, your heirs usually need a probate court process to transfer that property.
If you own property in another state, your family may need to open a second probate case in that state in addition to any California probate. This second case is often called ancillary probate. Even when things go smoothly, ancillary probate can mean additional legal filings, extra costs and delays before your family can sell or transfer the out-of-state property. For many families, it feels like unnecessary red tape during an already difficult time.
If you have a trust, you can often avoid probate in both states. A properly drafted and funded living trust can often avoid probate not only in California, but also in other states. When a property is titled in the name of your trust, your successor trustee can usually manage, sell or transfer it after your death without a court proceeding. This can make the administration process faster, more private and easier for your loved ones. It also helps prevent the “two-state probate” situation that often surprises people who own property outside California.
The most important detail: The trust must actually own the property. Here is the part many people miss: A trust only controls assets that are titled in the trust’s name. It is common for someone to sign a trust and assume everything is handled, while the out-of-state property remains in their individual name. If that happens, the trust may not prevent probate for that property.
Transferring out-of-state real estate into a trust usually requires a deed that follows the rules of the state where the property is located. This step is often straightforward, but it must be done correctly and properly recorded.
If you own real property outside California, now is a great time to review your estate plan. A will may still require probate in more than one state. A properly funded trust can often prevent that and make things much easier for your family. Your next step is simple: Verify if your out-of-state property is titled correctly for your plan. That one check can save your loved ones months of delay and unnecessary expense later.
Send your questions to ccolan@colanlegal.com and use “Alpine Mountaineer estate planning question” as the subject. We’ll answer your questions in our upcoming issues. This article is provided by your local estate planning attorney, Corina Colan. The Law Office of Corina I. Colan / (909) 265-3315 / www.colanlegal.com
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