How to Handle Out-of-State Property in Your Estate Plan

Owning property in more than one state is not uncommon. Whether it’s a vacation home in New Jersey, a rental unit in Florida, or inherited land in Ohio, out-of-state property can complicate your estate plan if it’s not properly addressed. Many Pennsylvania residents don’t realize that owning real estate beyond state lines triggers legal and logistical steps that can lead to delays, extra costs, and confusion for your loved ones.

Proper planning helps avoid these issues. By understanding the impact of multi-state property ownership, you can take steps to streamline your estate plan and make things easier for your family later on.

Why out-of-state property needs special attention

Real estate is governed by the laws of the state where it is located. That means even if your will is written in Pennsylvania and your executor is based here, a probate court in another state may need to get involved to handle your out-of-state property. This process is called ancillary probate.

Ancillary probate can be costly, time-consuming, and frustrating. Your estate may need to hire an attorney licensed in that other state, pay additional court fees, and go through an entirely separate process from the one occurring in Pennsylvania.

In most cases, it’s best to avoid this step if you can. Fortunately, there are planning tools available to do just that.

Start by making a complete list of what you own

Before deciding how to handle your out-of-state assets, you need a clear inventory. Identify all real estate you own, including:

Full ownership
Joint ownership
Timeshares
Rental or investment properties
Properties you inherited
Any vacation homes or second residences

For each property, note its location, how it’s titled, its estimated value, and whether there’s a mortgage or lien on it. This information gives your estate planning attorney a solid foundation to work from.

Options for handling out-of-state real estate

There are a few ways to address multi-state property in your estate plan, depending on your goals and preferences. The best option for you will depend on factors like the value of the property, whether you plan to keep it long-term, and who you want to inherit it.

Use a revocable living trust

A common way to avoid ancillary probate is to place your out-of-state real estate into a revocable living trust. When you transfer the property to the trust, you are no longer the owner in your individual capacity—the trust owns it instead. Because of this change in ownership, the property doesn’t go through probate when you pass away.

This approach works well if you have multiple properties or if you want to control how the property is used or distributed after your death. You can still manage or sell the property while you’re alive, since you can act as your own trustee. After your death, the successor trustee you’ve named will carry out your instructions without the need for court involvement in multiple states.

Consider transferring ownership while you’re alive

In some situations, you might choose to give the property to your heirs during your lifetime. This can reduce the size of your estate and avoid probate altogether. However, this option isn’t right for everyone.

Gifting property can create tax consequences, both for you and the person receiving the gift. You also lose control of the property once the transfer is complete. If you still want to use or manage the property, this could be problematic. Always consult with a tax or legal professional before moving forward with this route.

Use joint ownership or rights of survivorship

Some property owners title real estate jointly with another person so that the asset passes automatically upon death. This method can help avoid probate, but it carries risks.

For example, if you add an adult child to your deed, they become a co-owner right away. Their financial troubles—like lawsuits, divorce, or debt—could impact the property. Plus, you may unintentionally trigger gift tax issues.

Joint ownership can be a tool in the right circumstances, but it shouldn’t be used without fully understanding the consequences.

Create a limited liability company (LLC)

For rental or investment property, transferring the real estate to an LLC can provide liability protection, potential tax benefits, and ease of management. You can then assign your ownership interest in the LLC to a trust, further avoiding probate in multiple states.

This strategy is more complex and better suited for people managing income-producing properties or multiple units. It’s best handled with guidance from a financial or legal advisor familiar with both Pennsylvania law and the laws of the state where the property sits.

How a Pennsylvania estate planning attorney can help

Even though the property is located in another state, your estate plan still starts here in Pennsylvania. A knowledgeable estate planning attorney can help you build a coordinated plan that addresses both in-state and out-of-state assets.

Your attorney will review how each property is titled, explain the benefits and risks of each option, and help you execute the documents needed to transfer ownership or place the property into a trust. They can also collaborate with professionals in other states if needed to ensure everything complies with local laws.

Other important factors to consider

When handling out-of-state property, don’t forget about these related issues:

Property taxes: Each state has different tax laws, which can impact the cost of keeping the property in the family.
Insurance coverage: Make sure each property has adequate and appropriate insurance. A Pennsylvania-based policy won’t cover out-of-state property.
Maintenance and upkeep: Plan for how properties will be maintained, especially if they will be held for a period after your death before being sold or passed down.
Communication with beneficiaries: If you plan to leave a vacation home or rental unit to several heirs, discuss how shared ownership will work. Conflicts can arise if expectations aren’t clear.

Conclusion

Dealing with out-of-state property doesn’t have to be a burden. With the right planning, you can protect your assets, avoid extra legal processes, and ensure your wishes are carried out without unnecessary delays.

If you own real estate outside of Pennsylvania, now is the time to bring it into your estate planning conversation. Whether you’re looking to simplify your plan, reduce taxes, or make things easier for your family, a thoughtful approach can make a significant difference.

An experienced estate planning attorney can walk you through the steps, explain your options in plain terms, and help you build a plan that works across state lines. Planning today means peace of mind tomorrow—for you and for the people you care about most.