Geographical Boundaries: Estate Planning for Property in Multiple States
Just a couple of hundred years ago, most people lived and died in the same town. They met few people, made fewer friends, and couldn’t imagine a world beyond the borders of their hometown. Today, you would feel suffocated if you stayed in the same place for more than a few years, let alone for your entire lifetime.
With a change in our lifestyle, many average Americans now have more than one property in different states. They could have a beach house in Malibu and one where they live miles away.
There’s just one tiny snag: managing real estate that is located across state lines can be a little tough—imagine your will going through multiple probates before reaching the intended heirs!
But don’t worry. You’re not the first person with this problem and you won’t be the last. There are multiple provisions in place that you can look into while estate planning in Manhattan. Here are a few for your consideration.
Domicile and Place of Residence
Let’s begin by talking about what it means to have a property in multiple states. By law, even if you have several homes in different places, you must have one place of domicile. Depending on where you spend the most time, you will have to select that particular state as your ‘home.’ If you spend an equal amount of time in both houses, the court will decide for you and anoint your permanent address.
This is an important distinction to make since the state of your domicile is where you are registered for taxes and benefits. Moreover, probate is going to take place in your domicile state. This doesn’t mean that your property will not be taxed in its original state; just that the total tax bill may be affected.
Wherever your domicile is, that is where you can vote, get primary healthcare, hire attorneys, and be employed.
Personal Representative or Executor
If at any time in your life you are incapacitated, or at the event of your death, your personal representative or the executor of your will is the person who has whole and sole authority. If you have multiple properties in different states and you haven’t made an estate plan, you are burdening the person who has to carry out your wishes later.
Here is what will happen if you don’t have a comprehensive estate plan: the probate court will switch the title of the deed from your name to your heir’s. This sounds easy enough right? Well, no. The probate process is time-consuming and pricey to initiate, and if there is another property in a different state, the domicile state does not have any authority over it.
If your heir wants to inherit the property located in a separate state, they would have to begin a second probate process in the domicile location, known as ancillary probate.
Laws of the State
Here’s another tidbit of important information: you might have to pay double estate tax for your property if it is located in another state! There are several ways of avoiding this extra inheritance tax, one of which is establishing an LLC (Limited Liability Company). Your estate planning attorney in Manhattan might have important insight for you.
Avoiding a Double Probate
You really don’t want things to be difficult for your loved ones after you’re gone. It is important for you to keep them comfortable, and part of that is making sure they don’t have to initiate probate procedures in different states. There are many ways to avoid this inconvenience; one of them is a living trust.
Revocable Living Trust
We have previously discussed what a living trust is in quite some detail, but we can give you the gist of it. Using a living trust, you can transfer the rights for any property to a trustee that takes care of it for another third-party. Using this, the probate process can be avoided altogether, letting your heirs get away from complicated legal procedures.
Consult with Your Attorney
Depending on how much real estate you have and where it is located, a property lawyer will be able to tell you an option best-suited to you. We’ve simplified the basics, but that doesn’t mean you’re all done. A major part of estate planning in Manhattan is looking for an attorney that will give you wise advice. Find the right one, ask the important questions, and start the estate planning process today! Your heirs will thank you later.