You love your California home, but maybe you also own a vacation cabin in the mountains of Colorado, a rental condo in Arizona, or a slice of family land in Texas. If you do, you already know that juggling real estate across state lines can be complicated. What you might not realize is that owning property in more than one state can create a serious headache for your loved ones when you pass away, unless your estate plan specifically addresses it.
Figuring out how to handle out-of-state property in a California estate plan is one of the most overlooked (and most important) pieces of the estate planning puzzle. Without the right strategy in place, your family could end up going through probate not just in California, but in every other state where you own real property. That means multiple court proceedings, multiple attorneys, and a whole lot of time and money spent before your beneficiaries see a dime.
The good news? With some thoughtful planning, you can avoid that outcome entirely. Here’s what California homeowners with out-of-state real property need to know.
Why Out-of-State Property Creates a Probate Problem
When you own real estate, that property is governed by the laws of the state where it’s physically located, not the state where you live. This is called the principle of situs, and it’s the root cause of the multi-state probate problem.
Here’s what that means in practice: if you’re a California resident and you own a vacation home in Nevada, and you pass away with that Nevada property titled only in your name, your estate will likely have to go through Nevada’s probate process to transfer ownership of that property. At the same time, your California-based assets may need to go through California probate. That’s two separate court proceedings in two separate states, often running simultaneously.
This is called ancillary probate, and it can be expensive, time-consuming, and stressful for the family members left to manage it. The more states you own property in, the more probate proceedings your estate could potentially face.
The good news is that California residents have excellent tools available to avoid this outcome. Understanding the problem is the first step. The next is knowing your options.
The Best Solution: A Revocable Living Trust
For most Californians who own real property in another state, a revocable living trust is the most effective tool to handle out-of-state property in an estate plan. When your out-of-state real estate is titled in the name of your trust (rather than in your personal name), it typically does not need to go through probate in that other state when you die. The trust itself holds the property, and the successor trustee you’ve named can transfer or manage it according to your instructions without court involvement.
This is the same reason a living trust is so valuable for California residents in general. California has one of the most expensive and time-consuming probate processes in the country, and a properly funded trust helps your family avoid it. The added benefit for multi-state property owners is that it also sidesteps ancillary probate in each other state where you hold real estate.
The critical word here is “funded.” Simply creating a trust isn’t enough. You need to actually transfer the title of your out-of-state property into the trust through a process called a deed transfer. This typically requires recording a new deed in the county or jurisdiction where the property is located, and the requirements for doing so vary by state.
Working with an experienced California estate planning attorney who can coordinate the title transfer or refer you to a local attorney in the other state ensures this step gets done correctly.
Other Options for Holding Out-of-State Property
Joint Tenancy or Community Property with Right of Survivorship
If you own out-of-state property jointly with your spouse or another person, titling it as joint tenancy with right of survivorship (JTWROS) can allow ownership to pass automatically to the surviving co-owner without probate. This is a simple option in some situations, but it comes with limitations.
Joint tenancy doesn’t work for everyone. It doesn’t help if you’re the sole owner. It also doesn’t address what happens when the surviving owner later passes away. And in some states, removing a joint tenant or changing the title later can trigger gift tax considerations or require the other owner’s cooperation.
Transfer-on-Death Deeds
Some states (though not all) allow property owners to use a transfer-on-death (TOD) deed, sometimes called a beneficiary deed, to designate who inherits the property without probate. If the state where your out-of-state property is located offers this option, it can be a straightforward solution for simpler situations.
However, TOD deeds are inflexible compared to a trust. They don’t allow for contingency planning (what if your named beneficiary dies before you?), and they offer no help with asset management during your lifetime if you become incapacitated.
Limited Liability Companies (LLCs)
Some property owners transfer real estate, particularly investment or rental properties, into a Limited Liability Company (LLC). If the LLC interest is then held by your trust or transferred upon death as personal property rather than real property, it may avoid ancillary probate. This strategy has its own legal and tax implications and isn’t right for everyone, but it’s worth discussing with an attorney if you own investment property across multiple states.
Steps to Take Right Now if You Own Out-of-State Property
If you’re a California resident with real property in another state, here’s a practical approach to getting your estate plan in order:
- Take inventory of all real property you own, including the state and county where each property is located, and how each is currently titled.
- Review your existing estate plan (if you have one) to determine whether your out-of-state properties are properly addressed and titled in your trust.
- If you don’t yet have a trust, talk to a California estate planning attorney about creating one and funding it with all of your properties.
- If your out-of-state property needs to be transferred into your trust, your attorney may need to prepare a deed for recording in that state and may coordinate with a local attorney in that jurisdiction if needed.
- Update your plan whenever you acquire new property in a new state. Each acquisition should trigger a review of your estate plan.
It’s also worth knowing that even with a trust in place, your estate plan should include a “pour-over will” as a safety net. This type of will directs any assets that weren’t properly transferred into your trust during your lifetime to flow into the trust at death. While a pour-over will still goes through probate for those assets, it ensures nothing falls through the cracks.
Handling out-of-state property in a California estate plan takes a bit of extra coordination, but the peace of mind it provides for you and your family is absolutely worth it.
Ready to Protect Your Property Across State Lines?
If you own real estate in more than one state, you’ve already got more complexity in your estate than most people realize, and more reason to make sure your plan is airtight. The right strategy can spare your family from navigating multiple probate proceedings and give you confidence that everything will be handled the way you intend.
At the Law Offices of Daniel A. Hunt, our experienced estate planning attorneys help California residents build estate plans that account for the full picture of their lives, including out-of-state property. We’ll walk you through your options in plain language and help you put a plan together that actually works.
Contact our firm today to schedule a no-cost initial consultation. We’re here to help you protect what you’ve worked hard to build, wherever it happens to be located.
Frequently Asked Questions
Q: Do I need a separate estate plan for property I own in another state?
A: Not necessarily. A well-drafted California revocable living trust can cover real property you own in other states, as long as those properties are properly titled in the name of your trust. You don’t need a separate estate plan for each state, but you may need a deed prepared and recorded in the other state to transfer the property into your trust.
Q: What happens if I die without handling out-of-state property in my California estate plan?
A: If your out-of-state real property is titled only in your name at the time of your death, it will likely need to go through probate in the state where it’s located. This is called ancillary probate, and it’s separate from any California probate proceedings. It can be time-consuming and costly, delaying the transfer of the property to your heirs.
Q: Can a living trust really avoid probate in other states?
A: Yes, this is one of the biggest benefits of a properly funded revocable living trust for multi-state property owners. When out-of-state real estate is held in the name of your trust, it doesn’t have to go through probate in that state when you pass away. Your successor trustee can manage and transfer the property according to your trust’s instructions, without court involvement.
Q: What is ancillary probate, and how do I avoid it?
A: Ancillary probate is the probate process required in a state other than your home state, for real property you own there. It’s triggered when you die owning real estate that’s titled in your name alone in another state. You can avoid it by transferring the property into a revocable living trust, using a transfer-on-death deed (where available), or holding property in certain joint ownership arrangements.
Q: Do I need a lawyer in each state where I own property to handle my estate plan?
A: Not always, but it depends on your situation. Your California estate planning attorney can typically draft your trust and coordinate a deed transfer to fund out-of-state property into the trust. In some cases, particularly for states with unique recording requirements, your California attorney may collaborate with a licensed attorney in the other state to ensure the deed is properly prepared and recorded.
