You are a Michigan resident and spend most of your time here. However, you really do not like Michigan winters. You spend three or four months each year in a warmer climate, such as Florida or Arizona.
Extended stays in hotels or vacation rentals can be hit and miss. And they can be a bit pricy. You find an area you like and you decide to take the plunge; you buy a place. You really like coming to the same place every year that you control.
And you do not have to pack up everything for your stay. You have some things that stay down south, like a vehicle or a hot pot. The place is so convenient for you now while you are alive and well. However, do you know what is going to happen to that property when you are gone.
When you are bereft of life, if the property is in your sole name, in order to sell the property or distribute it to your loved ones, it will be necessary to have it probated, usually in two states. Firstly, your loved ones will need to start a probate proceeding in Michigan, your home state. Through this process, a personal representative is appointed, who then can start a supplemental or ancillary probate proceeding in the state where the property is located.
Even if your property is a manufactured home with a title on a rented lot, you may have to go through probate process in the state where the title is registered. Some states require probate papers from their state before the Secretary of State or Department of Motor Vehicles will transfer a manufactured home title out of a deceased person’s name.
Also, many states like Florida, have statutory probate fees. These fees can be surprisingly high. For example, I have never seen Florida ancillary probate proceedings cost less than $5,000, even for an ancillary probate administration for a single parcel of real estate.
Some people have attempted to avoid probate by doing their own mini estate plan with the use of joint ownership. This doesn’t necessarily avoid probate, it only delays it until the second death. In addition, some states, require special filings with the deed office or local assessor to remove a deceased joint owner’s name from the property. I have seen fees and costs for this process in excess of $2,000.
One of the best and most economical ways to get that property sold or distributed to your loved ones after you are gone, is to title the property in your revocable living trust, now. Most of the time, I usually see fees and costs of between $300 and $600 to have the property deeded in or out of the trust by an attorney in the state where the property is located.
I have seen people even attempt to avoid these fees by having their Michigan attorney deed their out-of state property to their trusts. The problem is with this is that real estate transfers are governed by state law. Unless the drafting attorney is licensed in the state where the property is located and knows that state’s real estate laws, there may not be a proper transfer of that real estate to your trust.
California and Arizona deeds look strikingly different than Michigan deeds and include many things we do not include in Michigan. Florida requires at least one and sometimes more government forms to be submitted with the deed before recording.
In addition, the out-of-state deed drafting attorney may be subject to charges in the state where the property is located. I have heard many stories from Florida about state officials going after out-of-state attorneys who draft Florida deeds and charging the attorneys with the unauthorized practice of law in Florida without a license.
You usually can retitle your manufactured home to your trust yourself with the guidance of your local attorney. Even then, there may be differences between states. For example, if you have a double-wide in Florida, make sure that both halves are tilted to your trust, because each half has a separate title. In Michigan, there is only one title for both halves.
And when you do deed or transfer title of your out-of -state property to your trust, make sure that your homeowners or other insurances list your trust as an additional insured. You do not want to give the insurance company and excuse to deny a claim.
A trust can be a powerful tool to keep you in control during your lifetime when you are alive and well; provide for you and your loved ones in the event of your mental disability; and when you are gone, you can give what you have to whom you want, when you want, the way you want; all at the lowest predictable overall cost to you and your loved ones.
By: Matthew M. Wallace, CPA, JD
Published edited November-December, 2013 in Savvy magazine as: Planning for Out-of-State Property