When you set up a will, it normally only disposes of the personal property and the real property that is located in the decedent’s state of residence, (known as domicile). Real property (real estate) that is located in different state than where the decedent had his permanent residence, can’t be disposed of by the will, without the property being subject to a separate probate proceeding, known as ancillary probate.

For example, John’s legal residence is New York. In addition to owning a home and personal property in New York, he owns a condo in Florida. His will provisions provide for disposing the New York assets, but if it tries to dispose of the Florida condo with this will, this situation will set up an ancillary probate procedure. John’s will in effect, has a double probate situation-the first in New York which was his residence, and the second in Florida where his condo was located.

It’s important to note that writing a provision in the will to try to dispose of this property to avoid ancillary probate would have had no effect.

If John wants to avoid an ancillary probate procedure for the Florida condo, a better planning tool would be to place the property in a trust. In order to avoid probate, the trust must be funded to accomplish its objective, since only assets transferred to the trust will avoid probate. To establish a funded trust, the trust property (the condo) must be designated and then transferred to the trust. Where real estate is transferred to the trust, a copy of the deed is attached to the trust agreement. This deed contains a full legal description of the property, and correctly identifies it as the asset that has been transferred.

Some important points to remember when transferring real estate to a trust:

· You may require a new title insurance policy in the name of the trust to retain the coverage. Title insurance protects you against claims that you don’t own the property. Whenever there is a transfer of title, the title company may require that the new owner purchase a new policy.

· The liability and fire insurance policies will need to be properly amended to show the name of the new owner-the trust.
he transfer of real estate to certain types of trusts may trigger environmental inspection or other reporting rules.

· You’ll need to consider mortgage recording fees, taxes, real estate transfer taxes, and recording fees for the deed.

· You should ask if the transfer of the real estate to your trust might trigger a property tax reassessment. If your property is currently undervalued, this could result in higher property taxes.

· If the property has a mortgage, have the document reviewed, to see if the note needs to be repaid to the lender.

· Check with your accountant for any tax consequences involved in making this transfer.

· If you are using this property personally, you must sign a lease with the trust in order to retain the legal right to use the premises. You must pay a fair market rental value. When the trust is a revocable living trust for your own benefit, a lease is not needed, since for tax purposes you will continue to be treated as the owner of the property.