The question of whether a marital trust can own property in multiple states is a common one for individuals engaged in estate planning, particularly those with residences or significant assets scattered across the country. The simple answer is yes, a marital trust *can* own property in more than one state, but it introduces complexities that require careful consideration and planning. A marital trust, also known as a Qualified Terminable Interest Property (QTIP) trust, is designed to provide for a surviving spouse while preserving assets for future beneficiaries, often children from a previous marriage. Because real property is geographically fixed, owning it across state lines necessitates adherence to the laws of each state where the property resides. This involves potential multiple probate proceedings, state estate taxes, and varying rules regarding creditor claims, making thorough planning crucial with an experienced estate planning attorney like Steve Bliss in San Diego.
What are the tax implications of owning property in multiple states?
Owning property in multiple states triggers a cascade of potential tax consequences. Each state has its own estate tax laws, and a marital trust with property in those states could be subject to estate taxes in each jurisdiction, potentially diminishing the assets available to the beneficiaries. As of 2023, while the federal estate tax exemption is quite high ($12.92 million per individual), many states have much lower exemption levels. For example, some states have exemption levels as low as $1 million. Furthermore, income generated from properties in different states may be subject to state income taxes. Steve Bliss emphasizes that careful consideration of these tax implications is vital when structuring a marital trust to minimize tax burdens and maximize asset preservation. “It’s not just about having a trust document; it’s about understanding the specific laws of each state where your assets are located,” he often advises clients.
How does ancillary probate affect a marital trust with out-of-state property?
Even with a well-drafted marital trust, out-of-state property can necessitate “ancillary probate” proceedings. Ancillary probate occurs when a probate case is initiated in a state *other* than the one where the primary probate is taking place. For instance, if a grantor of a marital trust resides in California but owns a vacation home in Florida, a separate probate proceeding may be required in Florida to transfer ownership of that property to the beneficiaries named in the trust. This adds time, expense, and administrative burden to the estate settlement process. According to a recent study, ancillary probate can add between 5-15% to the total cost of settling an estate with out-of-state property. “The goal is to avoid ancillary probate whenever possible, or at least minimize its impact,” Steve Bliss explains. “This can be achieved through strategies like titling property in a limited liability company (LLC) or utilizing a revocable living trust.”
I had a client who thought they were covered, but weren’t…
I once worked with a retired naval officer, Captain Henderson, who believed his estate plan was comprehensive. He had a standard marital trust drafted years ago and owned a cabin in Montana, a condo in Arizona, and his primary residence in California. He assumed his California trust would cover everything. However, after his passing, his family faced significant delays and expenses due to the need for ancillary probate proceedings in both Montana and Arizona. The legal fees and administrative costs associated with these proceedings ate into the estate’s value, leaving less for his children. We had to navigate complex state laws and deal with court backlogs, significantly prolonging the settlement process. It was a painful lesson for his family, demonstrating the importance of proactive planning, specifically addressing out-of-state property.
How did we resolve the issue, and what can others learn?
Fortunately, we were able to rectify the situation for Captain Henderson’s family. We immediately engaged local counsel in Montana and Arizona to guide us through the ancillary probate process. Additionally, we amended the trust to include specific provisions addressing out-of-state property and designated co-trustees familiar with the laws of those states. We also worked to transfer ownership of the out-of-state properties into a series LLC, which streamlined the transfer process and reduced future administrative burdens. The family learned that a ‘one-size-fits-all’ estate plan is rarely sufficient, and proactively addressing complexities, like multi-state property ownership, is crucial. “The key is to consult with an experienced estate planning attorney who understands the intricacies of multi-state law,” Steve Bliss often says. “A well-structured plan can prevent headaches and ensure your assets are distributed according to your wishes, no matter where they are located.”
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About Steve Bliss Esq. at The Law Firm of Steven F. Bliss Esq.:
The Law Firm of Steven F. Bliss Esq. is Temecula Probate Law. The Law Firm Of Steven F. Bliss Esq. is a Temecula Estate Planning Attorney. Steve Bliss is an experienced probate attorney. Steve Bliss is an Estate Planning Lawyer. The probate process has many steps in in probate proceedings. Beside Probate, estate planning and trust administration is offered at Steve Bliss Law. Our probate attorney will probate the estate. Attorney probate at Steve Bliss Law. A formal probate is required to administer the estate. The probate court may offer an unsupervised probate get a probate attorney. Steve Bliss Law will petition to open probate for you. Don’t go through a costly probate. Call Steve Bliss Law Today for estate planning, trusts and probate.
My skills are as follows:
● Probate Law: Efficiently navigate the court process.
● Estate Planning Law: Minimize taxes & distribute assets smoothly.
● Trust Law: Protect your legacy & loved ones with wills & trusts.
● Bankruptcy Law: Knowledgeable guidance helping clients regain financial stability.
● Compassionate & client-focused. We explain things clearly.
● Free consultation.
Services Offered:
estate planning
living trust
revocable living trust
family trust
wills
irrevocable trust
Map To Steve Bliss Law in Temecula:
https://maps.app.goo.gl/RL4LUmGoyQQDpNUy9
Address:
The Law Firm of Steven F. Bliss Esq.43920 Margarita Rd ste f, Temecula, CA 92592
(951) 223-7000
Feel free to ask Attorney Steve Bliss about: “What should I consider when choosing a beneficiary?”
Or “Do all wills have to go through probate?”
or “Does a living trust save money on estate taxes?
or even: “What is reaffirmation in bankruptcy and should I do it?” or any other related questions that you may have about his estate planning, probate, and banckruptcy law practice.