If you own a vacation home, you have opportunities to get away with people you care about to enjoy quality time. You get all of the benefits of vacations, and you are making a good investment, so you may actually turn a profit before all is said and done.
There is a lot to like about vacation home ownership, but from an estate planning perspective, you have to consider the estate administration implications.
Probate Process
When a simple will is used to transfer assets, the administration process does not take place in a vacuum. The executor that is named in the document will complete the hands-on tasks, but the will must admitted to probate, and the Surrogate’s Court will provide supervision.
Final debts are paid during probate, so the creditors are given a good bit of time to come forward. The executor will identify all the assets and prepare them for distribution, and this can involve appraisals and liquidation.
Probate will take about nine months at minimum in most instances, and more complicated cases can be stuck in probate for longer periods of time.
There are expenses that accumulate during probate, including court costs, the executor’s payment, legal and accounting fees, and appraisal and liquidation charges. These expenditures reduce the value of the estate, and this will result in lower inheritances.
You probably want your final affairs to be conducted privately, but this will not happen if you use a will. Interested parties can access probate records, and this information can potentially cause acrimony among people that were close to you.
Ancillary Probate
When you consider the drawbacks, one probate process is more than enough, but the situation is compounded if you own property outside of the state of New York. If you use a will to transfer your assets, ancillary probate in the state that the property is located in would be necessary.
As a result, there would be two separate probate processes, and your family would be forced to navigate through one of them from afar.
Revocable Living Trust
You could change the playing field if you use a revocable living trust instead of a simple will as your primary asset transfer vehicle. While you are alive and fully capable of sound decision-making, you would act as the trustee, so you would maintain control of the assets.
In the trust declaration, you would name a trustee to succeed you. This can be the trust department of a bank or a trust company, and you could alternately name someone that you know to act as the successor trustee.
Of course, your heirs would be the beneficiaries of the living trust. After your passing, the trustee would distribute assets to the beneficiaries, and the probate process would not be a factor. This also applies to the ancillary probate procedure.
In addition to the avoidance of probate, the estate administration process is further streamlined, because all or most of the assets will be owned by the trust. You can include a pour over will to direct assets that were in your personal possession at the time of your passing into the trust.
Another benefit is the ability to protect beneficiaries that may not be ready to handle large amounts of money. A spendthrift provision can be included, and the trust would become irrevocable after your passing.
The beneficiaries would not have direct access to the principal, and this would apply to their creditors as well. With regard to the distributions, you can instruct the trustee to distribute a certain amount each month or dictate some other incremental arrangement.
We Are Here to Help!
A living trust can be the ideal solution if you own property outside of the state of New York, and other people can also benefit from the utilization of this type of trust.
This being stated, there are other approaches that can be taken, and the right choice will depend on the circumstances. When you work with our firm, we will explain all of your options based on your unique personal situation and help you devise a plan that ideally suits your needs.
You can schedule a consultation at our Smithtown, NY estate planning office if you call us at 631-265-0599, and you can use our contact form if you would like to send us a message.
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