Ancillary Probate: What It Is and How to Avoid It
Probate is the process by which a court grants a person authority to deal with property owned by a deceased individual (“decedent”). If this person was named in the decedent’s will, he or she is called the executor or the personal representative of the decedent’s estate. With the court’s supervision, the executor of an estate will distribute the property in the estate according to the terms of the decedent’s will. If the decedent did not have a will, the court will appoint an interested person to deal with the estate’s property. This person is called the administrator of the estate. The administrator will distribute the property according to the laws in the jurisdiction where probate occurs. People are often confused and intimidated by the probate process because it can be complicated, time consuming, and expensive.
Probate of a decedent’s estate will be opened in the state in which the decedent was domiciled at the time of his or her death. This state will be the state of primary probate proceedings. However, the court in the state of primary probate jurisdiction will not have jurisdiction over real estate located in another state. The decedent’s Executor must apply to the probate court in each state where the decedent owned real estate. The purpose is to ask for the authority to deal with the real estate owned in that state. This “extra” probate process is known as ancillary probate. If the decedent owned real estate in multiple states, ancillary probate can become an enormous burden to the Executor. He or she will likely have to complete paperwork and appear at court hearings in each state where the decedent owned real estate. Ancillary probate can also eat into the estate’s finances. It will be necessary to pay court costs, attorney’s fees, and accounting costs in each ancillary probate state. This is in addition to the primary probate state. These costs can add up quickly.
There are many ways to avoid ancillary probate by completing estate planning in advance. One way is to own the real estate jointly with another individual with rights of survivorship. For example, if you own a vacation home jointly with your spouse with rights of survivorship, the home will pass to your spouse upon your death. There will be no need for a probate proceeding in most states. Joint ownership is not ideal for people who do not want to share ownership of their property with someone else during their lifetime. Joint ownership also may not be the most efficient solution for tax planning purposes. Joint ownership is also not a good idea if protecting the asset from creditors is important during the lifetime of both joint owners.
Another way to avoid ancillary probate is to use a revocable trust. Minimizing probate is just one of the many benefits of putting your property into a revocable trust. Property owned in a revocable trust remains under the control of the Trustmaker during his or her lifetime. However, the property will no longer be owned in the Trustmaker’s individual name. This means that, at the time of the Trustmaker’s death there will be no need to open probate proceedings in multiple states.
More complex solutions for minimizing probate and maximizing tax savings may include different types of trusts, business entities, or gifting strategies. For more information and strategies about how to avoid ancillary probate, or if you are an executor who needs help with the probate process, please call our office at 888-822-8778.