It is not an uncommon scenario for a middle class family of even modest means to own a vacation home in another state. For those of us who love to ski, hike and explore, mother nature’s wonders on horseback, Vermont and Wyoming may be your choice. For those of us who can never tire of beaches, the ocean and sun, California, Florida or maybe even the Carolinas are for you. Even more of us own timeshares and similar properties throughout the country.
Most of us never stop to think about what it takes to insure that these properties pass via a will without complication. Whenever a person lives, or, to couch it in lawyer lingo “domicile” in a state (and own the vast majority of their property in that state) their estate should go through probate in that location. The vacation property in the other state, however, will likely not pass as desired and outlined in the decedent’s will without opening an independent probate proceeding in that state. This secondary proceeding to insure the proper passing of the property in that state is commonly called “ancillary probate“.
HOW TO AVOID THE TIME, EXPENSE AND HEADACHE FOR THE EXECUTOR
There are many ways to avoid all of the potential problems that may come with the transfer of your property to your heirs. Real estate transfer taxes change, attorneys fees are rarely something that can be planned for in advance, valuations fluctuate from year to year and may be wildly erratic depending on the nature of the property and the location of the property. None of these expenses and precious few others are fixed costs. It is, therefore, difficult to predict the final cost to your heirs. In the meantime, it may not be possible for the heirs to use the timeshare or the vacation property and yet taxes and maintenance fees are still incurred.
As such if you own simple property such as time shares or a simple beach condo, some may advise you to add an adult heir as joint tenant with the right of survivorship to the property title. Certainly there are expenses related to such a transfer, but the costs are greatly reduced, can be accomplished at a time of your own choosing and with a known cost structure. However, one of the downsides to this is to open that property up to potential claims by the new joint tenant’s judgment creditors.
Another method to insure transfer of title to the property with reduced costs and complication is to place the property in a revocable trust, with you as the trustee. You have complete dominion and control over the property during your lifetime in the event you decide you want to sell it, rent it or let a friend or family member live there. You can insure that the property will pass to heirs who are minors at the time of your passing in the event you want to pass it on to grandchildren, young children or nieces or nephews. As with adding a joint tenant, the cost to transfer title from you to the trust is drastically discounted compared to probate, with the added cost of ancillary probate proceedings, again, you can control the timing for the transfer of the property to when it is most opportune to do so and the costs for these endeavors come with a known cost structure.