How to Handle Out-of-State Property in Estate Plans

A person owning real property in more than one state who dies without an estate plan may leave behind complex financial and legal matters for their survivors. Unless that real property is included in estate plans, survivors will need to open probate cases in each state where the decedent owns property. That’s a costly and time-consuming process, but avoidable.

If you own real estate in a state other than where you are domiciled, there are a few ways you can pass this real estate to your heirs without complications and potentially avoid burdensome taxes in other states.

Funding a Trust

Transferring your real estate to a revocable living trust is one way to avoid estate complications with out-of-state real property. To transfer real property, you would need a new deed that names the trust as the property owner. When you set up your trust, you can specify how trust assets are to be distributed, and this distribution plan can be changed during your lifetime. You must both create a trust and fund the trust by deeding the property into the trust, to accomplish this transfer.

Naming a Second Owner

If you own real property in another state in your name only and wish to pass it on to a particular person, you also could execute a new deed titling the property in both names and giving the surviving partner 100% ownership at the death of the non-surviving partner. To do that, you would file a deed, naming yourself and the other party as joint tenants with right of survivorship, or if married, as tenants by the entirety. Virginia, but not Maryland, permits the property owner to deed a (revocable) survivor right to another individual without creating a joint ownership (similar to a “payable on death” bank account).

While you may be able to avoid probate by naming a second owner, you could also create financial risks for yourself. For example, if the other non-spouse owner is sued, and the court issues a judgment in favor of that person’s creditor, the creditor could file a lien against the property you jointly own. This is a complicated issue from the perspectives of both creditor protection and tax planning, and marital status is a significant factor in this decision.

Issues Concerning ‘Domicile’

If you spend six months of the year in Maryland and six months of the year in Florida, only one of those states can legally be your state of domicile—even though you can be a resident of both states. Your state of domicile is considered the state you plan to return to and live in indefinitely. But in some estate and probate cases, especially if you own multiple residences, domicile isn’t always clear.

An article in Wealth Management magazine highlighted the complicated issues in the estate of comedian Joan Rivers and the interaction of income and estate taxes. Her will declared that she was a resident of New York but said her state of domicile was California. Normally, a will is filed in the state of domicile, but her will was filed in New York, for undisclosed reasons. California has no estate tax; New York does. And New York assesses estate taxes on in-state property, regardless of where the decedent was domiciled. The author of the article points out that there is no law prohibiting New York from declaring that Rivers’ actual state of domicile was New York and assessing New York estate taxes accordingly.

If you own multiple residences and prefer one state over the other as your official state of domicile, you can proclaim that fact in your will, but this is not determinative. If challenges should arise regarding your state of domicile, the court may determine your state of domicile by looking at personal records – bank accounts, vehicle registration, driver’s license, and voter registration, for example. If those records are primarily issued in your claimed state of domicile, that would support your stated preference.

Estate planning is a task many people would rather avoid, but when you have assets in multiple states, it’s essential. Lusk Law, LLC, can help you with your will and estate planning and advise you on the best solution for transferring your assets to your heirs. Our experienced attorneys have provided legal counsel and representation to people throughout the Greater Baltimore/Washington Metropolitan area, including Frederick, Howard, Baltimore, Carroll, Washington, and Anne Arundel Counties. Please call us at or fill out our contact form if you have any questions about this topic.

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