When More Than One Probate Becomes Necessary

Probate has a bad name. And most people don’t want one, much less two (or
more). But there are instances in which more than one probate proceeding can be necessary. If you die owning real property in a
state other than the state in which you are domiciled, a second ancillary probate
proceeding will be required in that state.

An ancillary probate is not a full probate. Rather, the ancillary probate serves only
to transfer the real property located in the second state. But, an attorney will still
need to be retained (and paid) to file and administer the ancillary probate
proceeding.

It is not uncommon for North Dakotans to own winter homes in Arizona, Texas or
Florida or lake cabins or hunting lodges in other states. These types of assets, if
held in probate form, will be subject to an ancillary probate proceeding.

An ancillary probate proceeding can be avoided for out-of-state real property if it is
transferred into a trust (revocable or otherwise). Alternatively, many states allow the use of a transfer on death
deed, which can serve as a non-probate means of designating who receives the
property on the death of the owner.

Other Reasons Why Having a Will is a Good Idea

There are additional reasons why having a Will is a good idea. Wills generally include
a guardianship clause when parents have minor children. This clause allows the parents
to name the person they want to serve as guardian should the parents die while their
children are still minors. Without a Will, it may be unclear who should serve as guardian,
and could result in family discord and possibly litigation if more than one person wants
to serve in that role.

In addition, Wills can be drafted so that the decedent’s assets are directed into a
testamentary children’s trust. Once the assets are transferred into the testamentary
children’s trust, the assets (and income from those assets) can be held and managed
for the benefit of the children. Assets can then be distributed to the children once
they attain the age of majority (or at later ages if desired).

Finally, having a Will can avoid potential litigation. All Wills include a clause that
names the person or persons who will serve as personal representatives or
executors of the estate. Without a Will, any interested person can apply to be the
personal representative or executor. Although an order of priority for appointment
as personal representative is provided by state statute, it is entirely possible for a
group of individuals (i.e., siblings) to have equal priority for appointment.

In most cases, whenever there are minor children, probate assets, or a history of
family discord, a Will is a good idea.

What is the Difference Between Probate and Non-Probate Assets?

Probate assets are any assets that require a probate proceeding in order to pass to
the intended heir or devisee (if the decedent had a will) or the individual entitled to
receive the property under the laws of intestacy (if the decedent had no will).
Probate assets include real property that is titled solely in the decedent’s name; but
also includes real property in which the decedent owned a tenants in common
interest at death. Tenancy in common means that each of the owners have an
undivided proportionate interest in the entire property. For example, it is common
for farmland to pass out of an estate to adult children as tenants in common. If a
child died owning that tenants in common interest, a probate proceeding would be
required for that child’s own estate.

Examples of other probate assets include – (1) personal property, such as jewelry,
furniture, and personal effects; (2) bank accounts or brokerage accounts solely in
the decedent’s name; (3) interests in partnerships, corporations, or limited liability
companies owned by the decedent; (4) life insurance policies that name the estate
as the beneficiary; (5) recreational vehicles and automobiles solely in the
decedent’s name.

Non-probate assets are those assets that already describe how the property will
pass at death. These assets bypass probate and go directly to the designated
persons.

Examples of non-probate assets include – (1) real property owned in joint tenancy
with rights of survivorship; (2) bank or brokerage accounts held jointly or with
payable on death (POD) or transfer on death (TOD) beneficiaries; (3) automobiles
and other vehicles held jointly; (4) any property held in the name of a trust; (5) life
insurance with designated beneficiaries (other than the estate); and (6) retirement
accounts with designated beneficiaries (other than the estate).

Revocable Living Trusts – A Good Idea?

A Revocable Living Trust can be a good estate planning option if the primary goal
of your estate plan is to avoid probate and to provide a means to manage your
assets should you become incapacitated. Transferring your property into a Trust,
including a Revocable Living Trust is also a good way to avoid the need for an
ancillary probate proceeding.

A Revocable Living Trust is a trust you set up during your lifetime. The person
who sets up the trust is called the grantor (or sometimes, the Settlor, Donor, or
Trustor). Once assets are transferred into the trust, the assets become non-probate
assets, which means that no probate will be required to distribute the assets in the
trust to the intended beneficiaries.

If a grantor transfers all of his or her assets into a Revocable Living Trust, there
will be no need for a probate proceeding because all of the assets will be in nonprobate form.

A Revocable Living Trust provides for the distribution of income and principal to the
grantor during the grantor’s lifetime. Once the grantor dies, the trust serves as a
“will substitute” because the trust itself describes how the assets in the trust will be
distributed.

A Simplified Stand-Alone Revocable Living Trust can be used for the purpose of
holding out-of-state real property, such as lake cabins or vacation property owned
in another state, that would otherwise require an ancillary probate proceeding.