Summer is here, and this is the time of year when people spend time in their second homes. If you own a vacation home, there are some estate planning considerations you should understand. Ancillary probate may be looming, but you can avoid it if you take the right steps.
Estate Administration
When you use a will to facilitate asset transfers, you name an executor in the document. This individual or professional fiduciary cannot act independently. Under California state laws, they would be required to admit the will to probate under most circumstances.
Probate Drawbacks
Probate is a court-supervised procedure that comes with some pitfalls. First, it will generally take nine months at minimum. The inheritors have to play a waiting game because they receive nothing while the estate is being probated by the court.
Secondly, probate is not free. Expenses include a filing fee, legal and accounting charges, appraisal and liquidation expenses, the executor’s remuneration, and other incidentals.
Lastly, it is a public proceeding. This means that interested parties can access the records to find out what transpired. This can cause complications and potential hard feelings among family members and others that may have an interest in the estate.
Ancillary Probate
One probate proceeding is a major hassle for the heirs, but there can be multiple procedures if you own a vacation home out of state or in another country. If you facilitate the transfer of the home through a will, ancillary probate would be necessary.
It would take place where the property is located. So, in addition to all of the standard hassles, there can be geographic challenges as well.
Revocable Living Trust
There is a very simple solution in the form of a revocable living trust as an asset transfer vehicle. You could convey all of your property to the trust while you are living. As the grantor of the trust, you would also be the trustee, so you can access and completely control the assets.
You can sell anything that is held by the trust, add more property to the trust, and/or change the terms. The trust would be revocable, so if you want to dissolve it entirely, you could do so.
When you draw up the trust, you name a trustee to succeed you after your death. You can also give this individual or someone else the power to administer the trust in the event of your incapacity.
The administration of a living trust takes place outside of probate even if there is property in multiple states. As a result, you would avoid standard probate and ancillary probate if you have a living trust.
Other Living Trust Benefits
While we are on the subject, we should run down a couple of other key living trust benefits. The estate administration process is generally streamlined when all of the property is held by the trust.
Plus, you can include spendthrift protections. After you die, the trust would become irrevocable. The beneficiary would not be able to directly access the principal, and this dynamic would apply to their creditors as well.
When you draw up the trust declaration, you can dictate the terms of the distributions. For example, you can have a trustee distribute the trust’s earnings leaving the principal intact. Many people will allow for larger distributions when the beneficiary reaches a certain age plateau.
Take Action Today!
Our doors are open if you are ready to work with a Petaluma, CA estate planning lawyer to put a plan in place.
As you can see, there are finer details that the average person may not understand. When you work with us, you can rest assured that your plan will be custom-crafted to suit your needs.
You can send us a message to request a consultation appointment, and we can be reached by phone at 707-769-9975.
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