Many high-net-worth families and retirees own vacation properties or investment homes across state lines—whether it’s a ski cabin in Colorado, a beachfront condo in Florida, or a rental property in Arizona. But what often goes unconsidered is the added complexity this brings to your estate plan.
If you’re a Texas resident with a second home in another state, your estate plan must account for multi-state property laws, probate jurisdiction issues, and potential tax implications.
At Peabody Law Firm in Southlake, TX, we regularly help clients in Westlake, Trophy Club, Keller, Colleyville, and neighboring communities plan strategically to ensure that their second (or third!) home passes efficiently to heirs—without complications or unnecessary costs.
The Hidden Risk: Ancillary Probate
Owning real estate in multiple states usually means your estate could be subject to ancillary probate—a second probate proceeding in the state where the out-of-state property is located. This is often in addition to the primary probate that takes place in your home state (Texas, for instance).
Ancillary probate can result in:
- Higher legal fees
- Delays in distribution
- Additional court filings
- Out-of-state attorney involvement
In short, ancillary probate can cause a logistical headache for your heirs at an emotionally difficult time. Fortunately, careful estate planning can often eliminate or reduce these risks.
Strategies for Multi-State Property Owners
There are several ways to structure your estate plan to avoid—or at least simplify—ancillary probate:
✅ Create a Revocable Living Trust
By placing your out-of-state property into a revocable living trust, you effectively bypass probate altogether. Upon your passing, the property can be transferred to beneficiaries without court intervention in either state.
✅ Title Property Jointly with Right of Survivorship
In some cases, retitling the property to include a joint owner with rights of survivorship (such as a spouse) can avoid probate. This isn’t suitable for every situation, especially if the property is intended for heirs other than your spouse or if there are blended family dynamics involved.
✅ Consider an LLC for Income-Producing Properties
If your second home is used as a rental, it may make sense to place it in a Limited Liability Company (LLC) for asset protection and streamlined transfer upon death. LLC interests can be passed through your estate or trust plan more easily than real property subject to state-specific probate laws.
✅ Coordinate with Out-of-State Counsel
We work closely with attorneys in other states to ensure all legal requirements are met, especially if you choose to execute state-specific deeds or need an ancillary trust agreement for non-Texas properties.
Tax Considerations to Keep in Mind
Each state has its own set of rules concerning property taxes, capital gains, and estate/inheritance taxes. For example:
- Florida has no state estate tax, but New York and Massachusetts do.
- Some states apply different homestead exemption rules, which can affect property tax or creditor protection.
- Capital gains taxes on real estate appreciation are calculated based on federal and local laws—planning can help minimize the bite.
If you’re not careful, your estate could end up owing taxes in more than one state.
What Happens If You Move?
Many retirees relocate or split their time between states, making the question of primary residence especially important. Where you’re domiciled impacts which state’s laws apply to your estate—and it can have tax implications as well. Make sure your estate plan reflects your intended domicile, not just your mailing address.
Don’t Leave It to Chance
Multi-state estate planning requires coordination. If you own out-of-state real estate and haven’t had your estate plan reviewed recently, now’s the time. At Peabody Law Firm, we help families preserve wealth and minimize legal complexity.
Whether your second home is a legacy asset or a strategic investment, we’ll help you build a plan that respects your goals—and spares your heirs unnecessary legal hassle.
Legal Disclaimer:
This article is intended for educational purposes only and does not constitute legal advice. Estate planning laws vary by jurisdiction and are subject to change. You should consult with a licensed estate planning attorney who is familiar with multi-state property laws to receive personalized guidance.