Ancillary Probate: When It Is Used, Where It Occurs, and How To Avoid It

Many people own property in more than one state, such as an ocean-side vacation home or a rental property in a former home state. It is important to think about how that property will be handled after you pass away. Through proper estate planning, you can help minimize the burdensome court proceedings your loved ones may otherwise face after your death.

What Is Ancillary Probate?

Probate is the court process that must take place after you pass away to transfer property you owned at your death to the loved ones named in your will (or to heirs designated by state law if you do not have a will). Probate is not required for property titled in a trust or that belongs to a surviving joint owner, such as a joint bank account or marital home jointly owned by you and your spouse that includes rights of survivorship.

When an individual owns real property in more than one state, multiple probate proceedings may be required. As a general rule, the law of the state where the real property is located governs how it will pass to heirs as well as the required court procedures for administering and distributing that property. The primary (domiciliary) probate proceeding is opened in the state of the decedent’s domicile at death. When the decedent also owned real property located in another state, an ancillary probate proceeding is typically required in that state to administer and transfer title to that property.

In the primary probate proceeding, the court establishes the validity of the will (if there is one), admits the will into probate, and appoints the executor (the person named in your will to manage your estate). The executor then locates the property, pays any outstanding liabilities, and distributes the property according to the instructions in your will.

Although procedures vary by jurisdiction, once the will has been admitted to probate in the primary state of residence, courts in other states will generally recognize and accept it through the ancillary probate process. The executor typically files authenticated copies of the primary probate documents and orders (including the will and the order admitting it to probate and appointing the executor) with the probate court in the state where the property is located. After the ancillary proceeding has been opened and the required filings have been accepted, the executor may administer the property under that state’s procedures, including collecting, managing, selling, or distributing the property to the individuals named in the will or to heirs at law if there was no will.

Most people try to avoid ancillary probate because it can involve costs associated with probating an estate, including court fees, accounting fees, and attorney’s fees. In addition, it means a double dose of all the other disadvantages associated with probate proceedings, such as a long waiting period before the property is transferred and the lack of privacy arising from public court hearings and records.

How To Avoid Ancillary Probate

Joint ownership with survivorship rights. If you own property jointly with another person, it can automatically pass to the joint owner through rights of survivorship, avoiding the entire probate process. This type of ownership is typically used for real estate, bank accounts, and other types of property that have a title. The surviving owner usually needs only to complete a few forms and submit them to the appropriate office to transfer the property. Once that is done, the property passes to the survivor without going through probate. Although joint ownership may seem like an easy way to transfer property, the money or property transfers outright, without restrictions, to the surviving joint owner and becomes subject to the surviving owner’s creditors, divorcing spouse, or bankruptcy.

Transfer-on-death deed. In several states, an owner may use a transfer-on-death deed (also known by other names, such as a beneficiary deed) to designate one or more beneficiaries to receive the property at the owner’s death. The deed does not presently transfer the property to the future owners; instead, the current owner retains full ownership and control during life, including the ability to sell, mortgage, or otherwise dispose of the property, and may revoke or change the designation at any time before death in accordance with applicable state law. At the owner’s death, title passes to the named beneficiary(ies) by operation of law (typically after all necessary paperwork has been handled, such as recording evidence of death), thereby avoiding probate for that property. A transfer-on-death deed, however, does not generally provide creditor protection for the beneficiary. When the beneficiary becomes the owner, the property is typically subject to their creditors as well as any existing liens and encumbrances.

Revocable living trust. Retitling your property, including out-of-state real property, into a revocable living trust during your lifetime can avoid ancillary probate. Trust assets do not generally require probate administration if the trust has been properly funded—that is, assets were transferred or retitled into the trustee’s name before your death.

To avoid probate more broadly, the trust should also be funded with assets located in your home state, including in-state real property and appropriate financial accounts. If you serve as trustee during your lifetime, you retain full control over trust property and may amend or revoke the trust at any time while you have capacity. If you become incapacitated, your successor trustee can step in to manage trust assets for your benefit, consistent with the trust’s terms. Upon your death, the successor trustee administers the trust and distributes trust property to the beneficiaries you have designated in the trust instrument.

Make Things Easier For Your Loved Ones

The last thing your grieving loved ones need when you pass away is a lengthy, expensive, and complicated process to handle the transfer of your money and property. When real estate is located in more than one state, administration can become even more burdensome, often requiring additional court filings, added costs, and delays if the estate plan does not properly address real property located in different states.

We can help you implement a comprehensive estate plan to minimize administrative friction and reduce the cost and stress for your loved ones. Contact us today to discuss strategies to ensure that your assets pass efficiently to your intended beneficiaries in accordance with your wishes, regardless of where the property is located.