Why a Revocable Trust Might Be Essential if You Own Property in Multiple States

While a revocable trust isn’t the right solution for everyone, if you own real estate in another state other than where you live, it can be particularly beneficial. Owning property across state lines can bring added complexity to estate planning, and a revocable trust may be the most effective way to minimize it.

Avoid Probate in Multiple States

When someone passes away owning property in multiple states, their estate must go through probate proceedings in each state where they hold real property. This process, known as ancillary probate, can be time-consuming, costly, and often creates delays in transferring assets to heirs. However, if those properties are titled in a revocable trust, probate in each state can be avoided. A revocable trust provides for more efficient transfer of these assets upon death, sparing your family from going through court proceedings in multiple states.

Beware of State-Specific Estate Taxes

For those with property in states with lower estate tax exemptions — such as Massachusetts, Maine, or Rhode Island — a revocable trust can provide even greater value. In these states, the estate tax exemption can be significantly lower than the federal exemption. Owning property outright in one’s own name may lead to a taxable estate that could incur thousands in state estate taxes. By consulting an estate planning attorney, you can explore options that may help reduce or avoid these taxes, like titling your property in a revocable trust or an LLC.

Some state laws, such as in Massachusetts, consider the value of the entire estate, not just the value of the property in determining whether estate tax is owed. Many Connecticut residents own a vacation home on Cape Cod or in Rhode Island, where the estate tax exemption level is much lower than the federal exemption, which could mean a significant state estate tax bill.

Is a Revocable Trust Right for You?

The need for a revocable trust depends on individual circumstances, including the types of assets owned, family dynamics, and personal goals. Consulting with an estate planning attorney will ensure that your plan is tailored to your unique needs, including strategies to ensure assets are managed efficiently at death or in the event of incapacity, and to mitigate estate taxes across states.

If you own property in multiple states — particularly in a state with a lower estate tax exemption — we encourage you to reach out to us at BPS Lawyers to discuss whether a revocable trust could be an essential part of your estate plan.