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ancillary probate and how to avoid it

What is Ancillary Probate and How to Avoid It

April 8, 2020 Douglas Davis

Many people own property in more than one state –

perhaps a vacation home in Florida, a rental property in a former home state, or even a car titled in another state. It is important to think about how that property will be handled as you create an estate plan. Without proper planning it may be necessary for there to be an additional probate proceeding called ancillary probate.

What Is Ancillary Probate?

A probate proceeding is the court process that must take place to transfer property you owned at your death to the loved ones you have named in your will (or to heirs determined by the government if you don’t have a will) when you pass away. Probate is not required for property that you have placed in a trust or that automatically belongs to a surviving joint owner upon your death.

In situations in which probate is required, more than one probate proceeding may be necessary if you own property in more than one state. Typically, the law of the state where real estate and tangible personal property is located determines what happens to that property when you pass away. Intangible personal property (such as a copyright or trademark, and in some states, a retirement or bank account) can be probated in the state where the property owner was living at death.

The primary probate proceeding takes place in the state where a property owner was living when he or she passed away. An ancillary probate proceeding is typically necessary if the person who died also owned real estate in another state.  For instance, if you lived in Virginia and owned property in North Carolina, then the primary probate proceeding would be in Virginia and ancillary probate in North Carolina.

In the primary probate proceeding, the court establishes the validity of the will, admits the will into probate, and then appoints the executor named in your will to manage the estate. The executor locates the property, pays the probate fees, taxes, any outstanding debts, files notices to creditors, prepares an inventory of assets and files accountings with the court.  When the court determines that everything has been handled properly, your property is distributed according to the instructions left in your will.

Once the will is determined to be legally valid in the primary probate proceeding, most states will allow the executor to then file letters of qualification as well as a court-stamped copy of the will, in the probate court in the state where the real estate or other assets are located. At that point, and once the requirements in the ancillary probate have been completed, the executor can exercise transfer property to the beneficiaries specified in your will.  Bottom line – two probates – each in a separate state.

Note:    Ancillary probate will also be necessary if you die without a will while owning real estate in another state (unless you have taken one of the steps discussed below to avoid it). If you do not have a will, state law will determine who will receive the property. Because state law varies, it is possible that the heirs specified in the law of the state in which you are living when you pass away are different from the heirs named in the law of the state in which your out-of-state property is located.

This is a situation that most people try to avoid because it can involve more of the same types of costs associated with probating an estate: court fees, accounting fees, and attorney’s fees. In addition, it means a double dose of all the other disadvantages associated with probate proceedings, including a long waiting period before the property is transferred, increased costs, and the lack of privacy arising from public court hearings and records.

How Can It Be Avoided?

Joint ownership. If you own property jointly with another person, for example, by joint tenancy with right of survivorship, tenancy by the entirety, or community property with a right of survivorship, the property will automatically pass to the joint owner without the need for a probate proceeding. This type of ownership is typically used for real estate, bank accounts, vehicles, and other valuable property. Although joint ownership of property avoids the probate process and might seem like a quick and easy way to transfer property, the money or property jointly owned is now subject to the surviving owner’s creditors, divorcing spouse, or bankruptcy.

Transfer-on-death deed. A few states allow you to file a special type of deed that will not become effective until your death (called a transfer-on-death deed) with the local clerk of court’s office. Unlike joint ownership, you retain complete control over the property during your lifetime, and you can even revoke the deed any time before your death. The person(s) named in the deed automatically receives ownership of the real estate upon your death, and a probate proceeding is avoided. Like joint property, transferring real estate using a transfer-on-death deed provides no protection for the real estate and could make it vulnerable to the new owner’s creditors or their divorcing spouse.

Revocable living trust. If you transfer the title of the property located in the other state into a revocable living trust during your lifetime, you can avoid all probate, including ancillary probate. This is because the trust owns the title to the property. Because a trust does not die but continues after your death, a probate proceeding is unnecessary. If you want to avoid probate altogether, you can also transfer your accounts and title to property located in your home state to the trust as well. If you name yourself as the trustee, you retain complete control over the property and can revise or revoke the trust at any time during your lifetime. It only becomes irrevocable upon your death or if you no longer have the mental capabilities to revise or revoke the trust. If you are incapacitated during your lifetime and are unable to act as trustee, the person you named as your successor trustee will continue to manage and distribute funds for your benefit. Upon your death, the successor trustee will distribute the property to your family members and loved ones when and how you have specified in the trust instrument.

We Can Help Make Things Easier for Your Loved Ones

When you pass away, the last thing your grieving family members and loved ones need is a lengthy, expensive, and complicated process to handle the transfer and disposition of your money and property. If you own property located in another state, the potential hassles they may face could be multiplied if you do not have a well-thought-out estate plan in place. The experienced estate planning and trust administration attorneys at Davis Law Group can help you create an estate plan that will enable you to have the peace of mind that comes with knowing that you have done everything you can to minimize the cost and hassle for your family when you pass away. Call us today to set up a meeting so we can discuss an estate plan designed to make sure all of your property is transferred to your beneficiaries as you wish, regardless of where it is located.