Keeping trust assets out of probate is a benefit that not only reduces legal fees for the estate but also expedites the distribution of assets to beneficiaries. An additional benefit that may apply to you is that placing out-of state property into your Revocable Living Trust may help your estate avoid ancillary probate—the probate of assets located in another state.
When a decedent passes away owning property located in a state other than the state of his or her residence, that out-of-state property must pass to beneficiaries either (a) by legal instrument or (b) through the probate process. Legal instruments that allow the property to pass outside of the probate process include a deed providing for joint ownership with right of survivorship for real property, a beneficiary designation for certain accounts or a Revocable Living Trust. If the proper planning is not completed prior to death, then the property must pass through the probate process of the state in which the property is located. In other words, if an Illinois resident has a second home located in Michigan, the home is owned in his individual name only and no Estate Planning is completed prior to his death, then following his death, his estate will be required to probate his Illinois assets in Illinois and probate the Michigan property in Michigan.
Probate in even a single state can cause the estate to incur significant legal fees and delay the distribution of assets to the beneficiaries. These issues are greatly exacerbated when dealing with probate in multiple states. Through proper planning, the hurdles of estate administration can be minimized.