Estate planning considerations when you have properties in multiple states. Many people use wills as their primary estate planning source. Now you have an option. You can have a will and that's fine. And you can also have an irrevocable family trust.
Pros and Cons of Irrevocable Family Trust
Now there are pros and cons to either one. The main difference that people like with the irrevocable family trust is that you avoid probate court. The thing that people don't like about irrevocable family trust is that it costs much more money. But in the long run, depending on how many properties you have, and in this case scenario, it saves. We're talking about having properties in multiple jurisdictions.
Estate Planning: Distribution of Assets with Properties in Multiple States
If you are going with the concept of using a will as your primary estate planning document to make your distribution of your assets upon your demise, you have to recognize that the state that you probate your will... Say you reside in Texas. Well, the probate court has jurisdiction over the property in that county where the property is.
So, when you get your letters, if you have properties elsewhere outside of Dallas County, or whatever county you live in, you're going to have to get letters and you'll have your letters. You don't have to probate the will over and over if it's in the same state, but you still have to use your letters to basically liquidate, sell the property, and then make your distributions.
Now in a situation where there are properties in different states, then you're going to have to take that will and probate it in every state where you have property. So, you see now that it's further complicated because when you go to a probate court - probate courts are what we call county courts, so even in a state like say Texas, that has 254 counties, this process could multiply itself, even though you don't have to probate the whole will, but you still have other steps that you have to take to basically get their property, get a position such that you can liquidate it, or change titles to it, make the distribution.
Why Irrevocable Family Trusts Offer A Solution
Another way, I won't say a better way… Another consideration to eliminate all of that litigation is to do at inter vivos transfer through an irrevocable family trust. Inter vivos means that while I'm alive, I'm taking this property out of my name and putting it in the name of this family trust. Okay? So, I'm Winifred Cannon and I'm going to create the Winifred Cannon irrevocable family trust.
The properties that I have, the bank accounts, any asset that I want to identify, I can move it out of my name into the name of the family trust. And so the terms of my trust will say because I've already transferred the property to that family trust, and then in the terms of my trust, I'm going to say upon my demise, because I'm the settler, will basically determine who gets what.
And then it's just a matter of transferring and making distribution. There's no court. Absolutely no court. So, how does a family trust work? And it has to be irrevocable. How does that work as a great estate planning tool where you have properties in multiple jurisdictions? And when I say multiple jurisdictions, in this instance, I'm saying different states.
What You Do
What you would do is you would identify all of your properties. Every state, you would transfer it out of your name into that family trust. So, even though your property is in Texas, if your family trust is in Nevada, then because it's already been transferred to the family trust.