Having an out-of-state vacation home can be delightful. But when the owners pass on, it can be a headache for the next generation.
When a person dies, assets that he owns in his own name are subject to probate. Probate is a process in court for the accounting of assets, payment of debts and obligations, and distribution of what remains.
When those assets include land located in another state, then an ancillary probate may also need to be opened. An ancillary probate is a second proceeding in another state. This usually adds to the time and cost of settling the estate.
Fortunately, there are alternatives to holding title to the vacation property outright. One way is to hold the real estate in a trust. Transferring the property into a trust means that its ownership will be subject to the trust provisions. For example, the grantor of the trust can reserve the use of the property while he is alive, and have it pass to the named beneficiaries in the manner specified in the trust agreement, rather than through probate.
That is one way to ensure that the trips to that second state are to actually use the vacation home to relax, not to attend court proceedings. It also saves on legal fees and costs that would be associated with opening a second case in that second state.
In order to take advantage of this approach, the trust agreement must be executed, and the property must be transferred into the trust correctly. But doing so is another step forward in building and preserving a legacy for future generations.