If you own a vacation home, timeshare, investment property, or any other asset outside of the state of Minnesota (or where you are domiciled if you live in another state) you must make sure ithat property is included in your estate plan. If you fail to include these properties in your estate plan, or fail to have an estate plan at all, your heirs will encounter issues, and usually the expense and hassle of court costs, when inheriting these assets.
Because state laws vary, your principal residence may even be divided one way in your state home while other properties – such as vacation homes, time shares, or other pieces of out-of-state land – can end up divided completely differently. Of course, having a comprehensive estate plan puts you in control and lets you determine who will receive your property, regardless of where it’s located.
Avoiding Unnecessary Probate
When property is located in a different state than where the deceased person was domiciled, your family may need to file a second probate case, referred to as an ancillary probate. For example, if you died as a resident of Minnesota but owned property in Arizona as well, you might have an ancillary probate in Arizona for the property located there. Typically a local attorney must handle the ancillary probate. You can bet that the Arizona attorney in our example above is likely not going to share the fees with your Minnesota probate attorney. This can add more cost, time, and hassle for your family to settle your affairs.
Probate is the legal process that is used to change title of property upon their passing, whether the deceased had a will or not. Each state has their own probate rules, making it fairly complex for families that inherit property in multiple states. It is important to know that while personal property may be probated in the state where the decedent is domiciled, real property must be probated in the state or country where it is located. Moreover, states vary on how they allow attorneys to bill for probating an estate. Some states allow attorneys to bill based on a percent of the estate while other states simply require that the attorney fees be “reasonable”. Minnesota is based on a reasonableness standard. If you own property in a state that allows fees based on a percent of the estate, you could be facing a hefty probate bill.
The need for ancillary probate can be avoided, however, through proper estate planning. Specifically, if the decedent transfers the property to his or her revocable living trust before death, ancillary probate can be avoided. Of course, there are several ways to avoid the costs, delays, and headaches of probate other than a trust, but each alternative has downsides. One way is to title the property jointly with your spouse or, alternatively, jointly with another individual. The property must be titled in a particular manner to avoid probate so that it automatically goes to the survivor. But this can make refinancing difficult, say if you name a child as a joint owner, and can also cause unnecessary taxes to be due. In addition, if you list a child as a joint owner, you have subjected your real estate to your children’s own creditors, bankruptcy, divorce, or other legal issues. We typically don’t recommend using this method to avoid probate because of these drawbacks. It is usually preferable to use a revocable trust which will avoid probate, and will result in saving money, time, and hassles for your heirs.
Property in Other Countries
Owning property in another country is another important issue to address in your estate planning. Your international property will be subject to the laws of the jurisdiction where it is located. For instance, if you own Canadian property, Canadian law will govern how that property transfers upon your death. As such, you will typically need to consult with a local attorney to determine what options are available to you since your revocable trust created in the United States will not govern the disposition of that property.
Different countries’ laws can be rather restrictive when it comes to ownership of real property. For example, Mexico restricts ownership of land along the border and along the coastline in what is called the “restricted zones”. In the restricted zones, other than Mexican nationals, only certain real estate trusts set up with Mexican banks or Mexican Corporations may own land in the restricted areas. Mexican law will govern how those interests may be transferred.
Intestacy laws can be complicated because they vary from state to state. At the same time, a well thought out estate plan avoids unnecessary probate costs, in every state where you own property. With the help of a knowledgeable estate attorney, you can avoid unnecessary complication and make settling your affairs as easy as possible for your heirs.
Remember to tell your estate planning advisor about everything that you own – no matter how small in value or where it is located. Your advisor won’t be able to protect your family and assets if you fail to disclose all of your property (both real and personal). If you have any questions about ancillary probate, or any other estate planning issues, contact us today.
Zach Wiegand is a Burnsville, Minnesota estate planning attorney and the owner of Gold Leaf Estate Planning, LLC. Gold Leaf Estate Planning is an estate planning law firm that handles probate and trust administration in Minnesota. We serve the Twin Cities metropolitan area with a focus on estate planning for clients in Burnsville, Eagan, Savage, Prior Lake, Lakeville, Apple Valley, Eden Prairie and the South Metro. The firm also handles probate in Dakota County, Washington County, Scott County, Hennepin County, and Ramsey County. Zach was named a Minnesota Super Lawyer – Rising Star for both 2017 & 2018 and he is a member of WealthCounsel – a national organization of estate planning attorneys dedicated to practice excellence. You can contact Zach via e-mail at email@example.com or by calling (952) 658-6503. Gold Leaf Estate Planning is located in Burnsville at 3000 County Road 42 W., Suite 310, Burnsville, MN 55337.