How Many People Own Property in Different States?

Property ownership in multiple states is not unusual. For example, in states with warmer weather, a significant percentage of the population may be snowbirds – people who spend their winter months in warmer climates. Another common occurrence is when an individual or family buys a home in a different state and relocates while still owning property in the state of previous residence. Whether real estate is inherited or purchased as an investment or a vacation home, owning multiple properties in different states has an impact on estate planning strategies.

What Are the Key Factors in Estate Planning with Property Ownership in Multiple States?

Owning property in more than one state adds an extra layer of complexity to the estate planning process. Key factors to consider include:

• Different jurisdictions: Each state in the U.S. has its own laws governing property ownership, inheritance, and probate. If you own property in multiple states, it is important to consider how jurisdictional differences may impact your estate plan. Tax treatment and the probate process can vary from one state to the next. 
• Asset titling: Certain forms of ownership make it possible to transfer assets outside of probate. Property that is titled in joint tenancy with the right of survivorship, tenancy by the entirety, or community property with the right of survivorship may be transferred directly to co-owners without going through probate. However, other factors, such as tax consequences and protection against creditors, should also be considered when titling assets. 
• Tax consequences: Property ownership in multiple states can complicate tax implications. Estate, property, and income taxes must be considered in estate planning to minimize tax liability. Understanding tax laws for all jurisdictions involved and how they impact your estate plan is important. Minnesota does not have an inheritance tax, but it imposes an estate tax on all assets of a decedent before they are distributed to beneficiaries, as stated by the Minnesota Department of Revenue. The federal government imposes estate tax only on high-value estates. As reported by the IRS, the filing threshold for federal estate tax in 2024 is $13,610,000.
• Probate avoidance: Probate is the legal process by which a person’s properties and assets are distributed after their death. It can be time-consuming and costly, particularly when it involves assets that include property in multiple states. Probate avoidance strategies can help simplify the transfer of assets, saving time and money. One popular strategy is establishing a revocable living trust and transferring any out-of-state property to the trust. This allows these assets to pass directly to named beneficiaries according to the terms of the trust. 
• Ancillary probate: In certain situations, some property may be subject to probate proceedings in another state. Ancillary probate can occur when real estate is located outside of the state where the decedent lived. This can delay the distribution of assets and increase the costs of administering an estate. Your attorney can advise you on options to help avoid the need for ancillary probate, such as transfer-on-death deeds, joint tenancy with the right of survivorship, or transferring property ownership to a trust. 
• Coordinating estate planning documents: Wills, trusts, advance directives, and powers of attorney are all documents that make up your estate plan. When multi-state property ownership is involved, it is critical to ensure all documents are coordinated and executed correctly in the laws of each state. For a will to be valid in Minnesota, for example, it must be in writing, signed by the testator, and witnessed and signed by two individuals over 18, as stated in the 2023 Minnesota Statutes, § 524.2.502. 
• Changing circumstances: Estate planning is an ongoing process, not a one-time event. If you own property in multiple states, your estate plan will need periodic review and updating to account for changes in tax laws, property ownership, and personal circumstances. 

What Are Some Estate Planning Strategies for Property Located in Different States?

A carefully crafted estate plan can help minimize the complications of property ownership in multiple states and help protect your assets. Estate planning strategy options may include the following:

• Trusts: Revocable living trusts and irrevocable trusts may be established to provide tax advantages and help you avoid probate. A revocable living trust enables you to maintain control over your property and make changes to the trust when necessary. An irrevocable trust may help minimize estate taxes and offer greater asset protection, but it cannot be changed once it is established. One popular estate planning technique for real estate not subject to a mortgage is a Qualified Personal Residence Trust (QPRT), in which residential property is transferred to an irrevocable trust. You may continue to use the property rent-free for a specified number of years, after which the property is held in trust for named beneficiaries. A Spousal Lifetime Access Trust (SLAT), an irrevocable trust funded with real estate for a spouse, is another option. 
• Business entities: Holding property in a limited liability company (LLC) or a corporation can provide potential tax benefits and protection from liability and help simplify property ownership. It may streamline the probate process when the property is held by one legal entity. 

Estate planning can be more complicated when you own properties in different states. Strategic planning becomes more critical than ever to protect your assets, minimize tax liability, and streamline asset distribution. With six decades of combined experience, our estate planning attorneys at Sandahl & Damhof can help. Contact us at 612-448-3898 to arrange a consultation.