Many people own real estate in their own names outside the State of New York, such as a beach house in Florida or a ski home in Vermont. Owning such property presents some unique challenges to your estate planning. People often do not understand that if they pass away owning out-of-state property, an ancillary probate proceeding may be necessary in another state.
What is an ancillary probate proceeding?
If you pass away as a resident of the State of New York and you own real estate in your name in another state, New York courts do not have jurisdiction over that out-of-state property.As a result, your Executor will need to file a separate proceeding in the other state, known as an ancillary probate proceeding, in order to transfer that property to the beneficiaries in your Will.
Can my New York attorney represent me in the ancillary probate proceeding?
Generally, your New York attorney cannot represent you in the ancillary probate proceeding in another state, unless they are also licensed to practice law in that state. Your attorney in New York should, however, assist you in obtaining representation in another state.
Is there a way to avoid the need for an ancillary probate proceeding?
In order to avoid an ancillary probate proceeding, you may consider conveying your property to a living trust.A living trust is a trust which you create during your lifetime.A testamentary trust, by contrast, is a trust created in your Will, which takes effect after you die and your Will is probated.
Are there different types of Living Trusts to consider?
The two basic types of living trust to consider are revocable and irrevocable trusts. In general, a revocable trust can be changed or revoked by you as the creator of the trust at any time and in any way you wish. In general, an irrevocable trust cannot be changed or revoked by you as the creator. As the creator of an irrevocable trust, you may have certain limited rights, such as a limited power of appointment that could allow you to change the beneficiaries of the trust to particular people or entities.
Which type of Trust should I choose?
There are a variety of reasons to choose a revocable or irrevocable trust. Both types of trust will allow you to avoid the necessity of ancillary probate for out-of-state real property. Revocable trusts allow you the maximum flexibility because, as stated above, you can generally revoke or change them as you see fit. Revocable trusts, however, do not allow you to preserve your assets for Medicaid planning purposes. You should make the decision about which type of trust to use only after discussing your goals with an experienced estate planning attorney.
What happens to my out-of-state property after I die?
If you put your out-of-state property in a trust, then after you die, the trustee of the trust will be able to administer the trust and eventually convey the property to your beneficiaries. In the alternative, the trustee can also sell the property and distribute the net sale proceeds to your beneficiaries.
Who would act as the trustee of my trust?
If you are creating a revocable trust, you can act as your own trustee and name someone as successor trustee to act after you pass away.If you create an irrevocable trust, it is best to appoint someone else as trustee.Trustees or successor trustees can be trusted friends or relatives.In addition, many financial institutions have trust departments that are available to serve in that capacity.
Does my trustee or successor trustee get paid for their services?
Institutional trustees, such as trust departments at financial institutions, typically have a published schedule of fees for their trustee services.Individuals that you appoint, such as a trusted friend or relative, can charge a commission for acting as trustee or they can waive their commission.Trustee commissions are set forth in New York law as a percentage of the amount of trust funds paid out, as well as a percentage of the annual value of the trust.
It is important to work with a qualified estate planning attorney to determine whether it makes sense to place your out-of-state real estate in a trust. As noted above, you should also discuss with your attorney what type of trust – revocable or irrevocable – best suits your estate planning goals.
Matthew J. Dorsey, Esq. is a Partner with O’Connell and Aronowitz, 1 Court Street, Saratoga Springs, NY. Over his twenty-one years of practice, he has focused in the areas of elder law, estate planning, and estate administration. Mr. Dorsey can be reached at 518-584-5205, This email address is being protected from spambots. You need JavaScript enabled to view it., and www.oalaw.com.
