How to Avoid Ancillary Probate When You Own Property in Two States
If you live in Huntsville and own a house, lake house or land in another state, your family may face probate here and a second case where the property sits. A properly funded revocable living trust can keep real estate held in the trust out of that second case. Funding real estate usually involves a deed prepared and recorded under that state's law.
Property in more than one state is one of the clearest reasons for a trust-based plan. Sarah S. Shepard prepares living trust plans for families in Huntsville and North Alabama, and she plans each trust around how your property is titled.
Why property in two states can mean two probates
Your will is usually probated in the county where you lived (Ala. Code § 43-8-162(1)). For most Huntsville residents, that is Madison County. Land in another state follows that state's rules, so your executor usually has to go through a court there, too, before the property can be sold or transferred.
The rules vary by state. Some require a full probate case. Others have a shorter route for an executor already appointed in Alabama. Either way, your executor usually needs a lawyer licensed in that state, authenticated copies of the Alabama court record, a second set of filings and more time.
This comes up most often when:
You moved to Huntsville and kept your old house, as a rental or for family visits.
You own a vacation place, such as a lake house, a beach condo or a mountain cabin.
You own family land in another state in your own name.
How to avoid ancillary probate with a living trust
A revocable living trust avoids ancillary probate by owning the property when you die. One trust can generally hold your Huntsville home and real estate in other states. You usually serve as your own trustee, so you keep control, and you can change or revoke the trust (§ 19-3B-602). At your death, your successor trustee manages, sells or distributes each property under the trust's terms, generally without a probate case in either state.
Probate avoidance depends on the property being properly held in the trust. For real estate, the usual funding step is a deed to the trustee, prepared and recorded under the law of the state where the land sits. If the cabin remains outside the trust at your death, your pour-over will can move it into the trust through probate, usually in both states. Our post on avoiding probate in Alabama includes a funding checklist for the rest of what you own.
Deeding out-of-state property to your trust
Moving the property into your trust usually takes a new deed, signed and recorded under the law of the state where the land sits. We prepare and record deeds for Alabama property only as part of an estate plan, when your engagement includes that work. A deed for land in another state may need a lawyer licensed in that state.
Settle these questions before that deed is signed. The answers vary by state, so put them to a lawyer there:
Does the state charge a transfer tax, or require a special filing, for a deed to your own trust?
Will the deed change the property tax assessment or end a tax exemption?
Does your title insurance carry over?
What do your mortgage lender and homeowner's insurer need?
Sarah walks you through the funding steps your plan needs, and your engagement states which of them the firm handles.
Other ways to avoid ancillary probate, and their limits
A survivorship deed. If you and your spouse own the property with a right of survivorship that is valid where the land sits, it generally passes to the survivor without probate there. That only postpones the problem. When the surviving owner dies owning it alone, the second probate usually comes back.
Adding a child to the deed. With survivorship language valid in that state, the property can pass to your child without probate. Without it, your share still goes through probate there. Either way, your child owns a share now. You usually need the child's signature to sell or refinance, the child's creditors may be able to reach that share, and it raises gift and income tax questions for your tax adviser.
A transfer-on-death deed. Some states allow one for land in that state. Whether the state where you own property allows one is a question for a lawyer there. Where one is available, the land passes to whoever the deed names, not under your will, so it has to be coordinated with your trust and the rest of your plan.
Selling it. If no one in the family wants the property, selling it during your life ends the question.
Moved to Huntsville with a trust from another state?
The problem can flip. Your old house may already be held in your trust, while the home you bought here may still be outside it. A trust validly created in another state generally remains valid in Alabama (§ 19-3B-403). Review how each house is titled and complete the funding steps your plan requires. More on updating your estate plan after a move.
Example: a rental left behind after a move to Huntsville
A couple moves to Huntsville for work at Redstone Arsenal. They keep their old house in another state as a rental and buy a home here, both in their own names with survivorship deeds. When the first spouse dies, both houses pass to the survivor. When the survivor dies, the executor opens probate here, then a second case where the rental sits, with a lawyer there.
Suppose instead they sign a revocable living trust, deed the Huntsville home to themselves as trustees and, with a lawyer in the other state, deed the rental to the trust too. After both deaths, their successor trustee can generally sell or distribute both houses without a probate case in either state.
Questions about avoiding ancillary probate
Does a will avoid ancillary probate? No. A will passes property only through probate, so land left by will in another state usually needs a court proceeding there, too.
Is a trust worth it for one property in another state? Often, because it can spare your family a second court case. Sarah weighs that against the work of setting up and funding the trust, including the out-of-state deed, and looks at what else you own. See whether you need a living trust and what shapes the cost of an estate plan.
What if my family needs ancillary probate anyway? Ty Shepard can represent the executor named in your will if an Alabama probate is needed. The other state's case usually needs a lawyer licensed there, and Ty can work with that lawyer. Our post on ancillary probate in Alabama covers the reverse situation: someone who lived outside Alabama but owned property here.
Talk with Sarah about property in two states
Own a home, lake house or land outside Alabama? Schedule a consultation with Sarah S. Shepard, and have a copy of each deed handy, or at least know whose names are on it. You work directly with Sarah on your living trust and the rest of your estate plan, from your planning consultation through signing. Because our firm also handles probate and trust administration, she plans with what your family will face after a death in mind.
Sarah S. Shepard is an estate planning attorney at Sparkman, Shepard & Shepard, LLC in Huntsville, admitted to the Alabama State Bar in 2012. She prepares wills and trust-based estate plans for families in Huntsville and North Alabama. More about Sarah S. Shepard.