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Using a Trust to Manage Property in Different States

One of the main benefits of a living trust is that it can make it easier to administer property you own in multiple states. Probate is handled at the state level, so if you own a house in California and a rental property in Arizona, your probate estate would need to open a separate proceeding in each state after your death. However, if you have a properly funded trust, your successor trustee can administer both properties without having to go through probate at all.

New Hampshire Defers to California in Trust Dispute

Even if you have a trust, you still need a will. Typically you sign what is known as a “pour-over will,” a document that basically transfers any remaining probate property at death to the successor trustee of your trust. This is important because it confirms your intent to distribute all of your property through the trust.

Failing to sign a pour-over will can lead to legal complications, especially if you are dealing with relatives who live in a different state than where you created the trust. A recent decision by the New Hampshire Supreme Court offers a helpful illustration. This case involves a woman who died in New Hampshire but made her estate plan in California.

The decedent created a living trust in 2012 with the help of her California estate planning attorney. The decedent owned real property in California and New Hampshire. Together with her personal property, the decedent transferred more than $2.5 million in assets into her trust. The decedent did not leave a will of any kind.

The trust instrument contained a provision stating that California law should govern the trust or any legal dispute arising from it. This choice of law provision applied regardless of where the decedent was living. As noted above, the decedent passed away in 2014 while residing in Hancock, New Hampshire.

One of the decedent’s siblings filed a petition in the New Hampshire courts to determine whether or not the decedent validly transferred the Hancock property into the trust. Since there was no will, if the property did not belong to the trust it would pass under New Hampshire intestacy law to the decedent’s three surviving siblings, including the petitioner. The successor trustee objected to the petition, arguing any challenge to the trust must be heard in a California court under California law.

The New Hampshire Supreme Court agreed. Upholding a trial judge’s ruling, the Supreme Court said under the terms of the trust, California had proper jurisdiction to decide what assets belonged to the trust. Should the California courts decide, applying New Hampshire law, that the Hancock property is not part of the trust, then it would be up to the New Hampshire courts to resolve the siblings’ probate petition.

Make Sure Your Estate Plan is Complete

Once again, the litigation above probably could have been avoided altogether had the decedent left a pour-over will clearly establishing the trust’s title to her New Hampshire property. The lesson here is never make an incomplete estate plan. If you need help from an experienced San Diego estate planning lawyer in making your own will or trust, contact the Law Office of Scott C. Soady today.

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