Plenty of people own property in more than one state. Maybe it's a vacation condo in Florida, a rental house back in a state you used to live in, or a piece of land you inherited and never sold. It's easy to forget about that out-of-state property when you think about your estate plan. But how it's titled can create a real headache for your family, because it may trigger a second, separate court proceeding called ancillary probate. With a little planning, that result can be made much easier on your loved ones, or avoided entirely.
What Is Ancillary Probate?
Probate is the court process that transfers the property you owned at your death to the people named in your will, or to the heirs the law selects if you didn't leave a will. Not everything goes through it. Property you've placed in a trust, or that automatically passes to a surviving joint owner, like a jointly held bank account or a home you and your spouse own together, skips probate, because you no longer own it outright when you die.
When probate is required, more than one proceeding may be needed if you owned property in more than one state. As a general rule, the law of the state where real estate is located controls what happens to that real estate when you pass away. So the main, or "domiciliary," probate happens in the state where you were living when you died, and a second ancillary proceeding becomes necessary in the other state where you owned real estate.
In the main proceeding, the court confirms the will is valid, admits it, and appoints your executor. The executor then locates the property, pays the debts, and distributes what's left. Once the will is found valid in that primary proceeding, the courts in other states will often let the same executor file the necessary letters and a certified copy of the will with the local probate court where the property sits. From there, the executor can transfer that out-of-state property to your beneficiaries under that state's rules.
One important note: ancillary probate is also necessary if you die without a will while owning real estate in another state, unless you've taken steps to avoid it. And because each state's inheritance rules differ, the heirs the out-of-state law selects might not be the same people the law of your home state would have chosen.
Why Families Try to Avoid It
Most people would rather their family not deal with two probate proceedings, and the reason is simple: a second proceeding usually means a second round of the same costs and delays. Court fees, accounting fees, and attorney's fees can all repeat in the other state. On top of that, you get a double dose of the other downsides of probate, a longer wait before property transfers, and the loss of privacy that comes with public court records and hearings.
How Can It Be Avoided?
The good news is that a few well-known planning tools can keep out-of-state property out of ancillary probate. Each has trade-offs worth understanding.
Joint Ownership
If you own property jointly with someone else, with a right of survivorship, it passes automatically to the surviving owner without probate. This works for real estate, bank accounts, vehicles, and more. Usually the survivor just files some paperwork with the recording office, the bank, or the relevant title agency. The trade-off is real, though: once you make someone a joint owner, that property is exposed to their creditors, their divorce, or their bankruptcy, and you've given up sole control of it during your life.
Transfer-on-Death Deed
Some states let you record a deed that doesn't take effect until your death, often called a transfer-on-death or beneficiary deed. Illinois has its own version, the Transfer on Death Instrument (TODI), for Illinois real estate. Unlike joint ownership, you keep complete control of the property while you're alive and can revoke the deed any time before death. The person you name receives the property only when you die, and probate is avoided. Keep in mind that whether this option exists for your out-of-state real estate depends on that state's law, and like joint ownership, it offers the new owner no protection from their own creditors once the property passes.
Revocable Living Trust
For most people, this is the cleanest fix. If you transfer the title of your out-of-state property into a revocable living trust during your life, you avoid ancillary probate, because the trust, not you, owns the property, and a trust doesn't die. You can take it a step further and move your home-state property and accounts into the trust too, avoiding probate altogether. Name yourself as trustee and you keep full control: you can manage everything and revoke the trust whenever you like. It becomes irrevocable only at your death or if you lose the capacity to manage it, at which point your successor trustee takes over, first managing things for your benefit if needed, and then distributing the property to your loved ones as you directed. Our estate planning and trust administration pages cover how a trust functions over the life of the plan.
We Can Help Make Things Easier for Your Loved Ones
When you pass away, the last thing your family needs is a long, expensive, complicated process to transfer your property, and if you own real estate in another state, that burden can double. We can help you build an estate plan that gives you the peace of mind of knowing you've done what you can to spare your family the cost and hassle, no matter where your property is located.
If you own property in more than one state and want to keep your family out of a second probate, let's talk about a plan that fits your situation.