Over the last few weeks several of our new clients have had questions about the probate process for real property located in other states. I wanted to share with you some basic information about the process to help you understand and plan for the impact of owning out of state real property.
Probate is the legal process whereby a will of a decedent is authenticated and the estate of the decedent is administered pursuant to the terms of the authenticated will or state law. It generally entails the collecting of the decedent’s assets, the liquidating of the decedent’s liabilities and distributing the remaining property pursuant to the terms of the will or state law. The probate process normally occurs in the state where the decedent resided at his or her time of death.
People living in Texas are lucky because probating a will in Texas is relatively simple and inexpensive when compared to other states. Normally, you can probate a simple will with no issues for less than $2,000. That is not the case in a lot of other states where the cost of probating a will can cost $10,000 to $20,000 or more. This is why you see so many out of state attorneys and estate planning providers pushing revocable trusts to avoid probate.
What most people don’t realize is that you generally must go through the probate process in each state in which you own real property at the time of your death. For example, if you live in Texas but own a vacation home in the Colorado and an oil and gas mineral interest in Oklahoma, your executor/administrator must probate your will in Texas, Colorado and Oklahoma. This compounds the complexity of administrating the estate and substantially increases the costs of probating a will. The probating of the decedent’s will in Colorado and Oklahoma is called “ancillary probate”.
The solution to avoid the additional complexity and costs of the ancillary probate process is to hold legal title to your real property located outside your state of residence in a legal entity or trust. Most legal entities are designed for business operations and purposes and have tax and reporting costs associated with them, so holding legal title to the out of state real property in a trust will generally avoid these problems.
Look at your situation and if you own out of state real property consider the impact of the ancillary probate process upon your estate and your beneficiaries. If you have questions about ancillary probate process or need help, please feel free to contact us.