It’s the middle of summer, and families all across Atlanta are looking for ways to beat the heat. Does your family love to escape to the beach? What about a cool mountain retreat? Maybe you like to take a week every summer to visit friends or family up north. Wherever you travel, we know that finding comfortable, affordable accommodations can be a struggle. That’s why more and more Atlantans are choosing to invest in vacation properties. Not only does a beach house or mountain cabin offer a consistent retreat from busy city life, but it can also be a way to build wealth and invest in the future.

Taking Steps to Protect Your Vacation Home Investment

If you are considering purchasing a vacation home, or if you’ve already made the investment, what steps have you taken to protect your property? Protecting a part-time residence, as opposed to your year-round home, can take a whole different approach. You may consider different kinds of insurance, different security, even holding title differently.

If you own a second home out of state, this becomes even more important. Out of state properties take extra care and attention to ensure that they remain safe and well-tended. They also need to be carefully managed before you pass. Why? Without properly planning for out of state property to pass to your loved ones, that gorgeous oceanview condo can quickly become more of a burden than an asset for your heirs.

The Risk of Ancillary Probate

Outside of the estate planning world, the term “ancillary probate” is not heard too often. However, in our day-to-day, it’s something we work hard to help our clients avoid. What is ancillary probate? Basically, it is the requirement that an out-of-state resident go through a second probate process in the state where real estate is located. It’s easiest to understand using an example.

Let’s say we are working with Tom, an Atlanta native and homeowner. Tom lives here in Atlanta full time, and all three of his children live at home with him. The two younger kids are in middle and high school, and his oldest is a sophomore in college out of state. When all three kids were young, Tom bought a beachfront condo in St. Petersburg, Florida. He and the kids have spent some incredible summers at the condo, enjoying the sunshine, riding bikes, and playing in the surf. To protect his children, Tom has a will in the State of Georgia that provides for his three kids, leaving them equal shares of everything, including their comfortable Atlanta townhome. When Tom passes suddenly, his sister (who is named personal representative in his will) steps in to care for the younger children at home and help guide his estate through the Georgia probate process. She gets a great lawyer, and she does a wonderful job caring for the kids’ needs. But,, probate is still pretty overwhelming. It takes a long time, she isn’t able to access any of Tom’s funds that he left behind to care for the kids until the proceedings are over, and she keeps having to take off of work to go down to the courthouse and meet with her lawyer. Then, on top of everything, the matter of the Florida condo comes up. Why? Because his out of state real estate can’t pass through Georgia probate. Any real estate held in a different state than the decedent’s residence will need to go through probate in that state. So, Tom’s sister has to fly back and forth to Florida. She has to hire a Florida probate attorney. The property gets held up. It takes a long time to move through the probate process before she can get access to be able to sell it. In short, it’s a mess. 

Including Your Vacation Home in Your Estate Plan

Tom’s story is a typical one of ancillary probate. As we think about Tom, there are a lot of things he could have done in his estate plan to ease the time, stress, and cost of probate on his sister and his kids. For now, though, let’s focus on the ancillary probate problem. At the very least, what could he have done to prevent his sister from having to travel repeatedly out of state and deal with the burden of ancillary probate?

Lucky for Tom, his sister, and the kids, the answer is relatively simple: A Revocable Living Trust. When a property is titled in a trust, no matter where that property is located, it passes in accordance with the trust instructions. We’ve explained the basics of Revocable Living Trusts elsewhere, but here, we see clearly one of the greatest benefits of this estate planning tool. Of course, you can choose to title all of your real estate (and the rest of your assets, too!) into an RLT, avoiding probate altogether (ancillary or otherwise). However, if you choose not to do so, an RLT can be used solely to transfer an out of state property easily and quickly. As with any trust, the instructions can also provide how the property should be treated and for whose benefit. For Tom, not only would an RLT have kept his sister from traveling to Florida and spending money on a second attorney, it also would have allowed her to quickly sell the property and use those assets for the benefit of Tom’s named beneficiaries. If his trust beneficiaries are his three children, Tom’s sister (assuming she is also named as trustee for the RLT) can take the proceeds of that Florida condo sale and immediately begin providing for the kids in accordance with Tom’s trust instructions.

If You Own Property Out of State, It’s Time to Take Control

As an estate planning attorney, I often meet with clients who say, “I don’t need much. My life is pretty simple. I just need a basic will.” For some people, that may be true. However, owning real estate out of state is one of the most prominent triggers that says to me, this is not a basic will situation. This family needs a more comprehensive estate plan. If you own, or are considering buying, real estate out of state, let’s talk. Give Brian M. Douglas & Associates a call at (770) 933-9009.