Transferring Out-of-State Real Estate to Your Heirs

If you own real estate — timeshares, vacation homes, investment properties, or unimproved real estate — that you intend to leave to your heirs, transferring the title after your death can be complex. But if that real estate is out of state, the complications multiply.

Upon your death, a probate process will occur in the state where you live. This involves filing your will with the local court. In addition, probate proceedings outside of Indiana must be initiated in each state where you own real property. These additional probate proceedings are called ancillary probate or ancillary administration. Your heirs will need to pay court filing fees in each state where you own real property and hire an attorney licensed to practice law in the state where the property is located. Separate proceedings are necessary because the state court of your principal residence cannot affect title to real property located in another state.

An additional word of caution: If you die without a will, generally speaking, the law of the state where the real property is located will determine how the property is distributed. Since laws vary state by state, real property located in your home state may be distributed differently from your vacation home in another state if you don’t have a will.

Whether you have a will or not, you should talk to an estate planning attorney in the state where the real properly is located to find out the procedures your heirs will face if you leave them your out-of-state property. The only courts with jurisdiction to change title to real property after your death are the state courts within the state where the property is located.

Remember, if you leave a will, the out-of-state court will distribute the property accordingly. Without a will, the out-of-state court will distribute the property according to its state laws.

There are a few ways to avoid ancillary probate for out-of-state real estate:

  • Title the deed for your real property jointly with your spouse or another person. Property titled jointly with rights of survivorship passes automatically to the surviving joint owner at the first death. This automatic transfer is sometimes known as a transfer by operation of law. No probate proceedings are required for title to pass to the surviving joint owner.
  • Find out if the other state has enacted transfer on death deed laws. Such laws create an automatic transfer to a beneficiary named in the deed upon the owner’s death.
  • Transfer the out-of-state real estate into a living trust. At your death, the trustee passes the property to the beneficiaries named in your trust.

When you avoid ancillary administration through planning, you will save your heirs time, money, and aggravation, not to mention the delays of multiple state proceedings.

With the advice and help of an estate planning attorney, you can eliminate unnecessary complexity for out-of-state real estate transfers and minimize administration expenses for your heirs.