It is great to have somewhere special to go when you can carve out some spare time, and when you own a vacation home, you are making an investment. In the end, you enjoy the luxury, and you actually turn a profit doing it if everything goes according to plan.
At the same time, you should consider the estate planning implications if you intend to use a will as your asset transfer vehicle.
When a will is used to facilitate inheritance distributions, the executor cannot act independently. They are required to admit the will to probate, and in New York, the Surrogate’s Court would provide supervision during the administration phase.
This is sometimes referred to as domiciliary probate because it is proceeding in the jurisdiction where the decedent was domiciled. This process serves a purpose because the validity of the will is determined, and creditors are given an opportunity to come forward seeking payment.
At the same time, it can be less than ideal for the rightful heirs to an estate. One negative is the waiting game because no inheritances are distributed while the estate is being probated.
It will typically take about eight or nine months at minimum, and complicated cases can take considerably longer. Probate expenses consume a portion of the estate before it is distributed, and there is a loss of privacy, because probate records are available to anyone that is interested.
Passing through one probate procedure is difficult enough, but if you own a vacation property in a different state, the laws in that state would hold sway. As a result, there would be another probate proceeding called ancillary probate.
You do not have to accept the inevitability of two different probate procedures when you are planning your estate. A revocable living trust can be the ideal solution because the administration of the trust would not be subject to probate in either location.
When you use a living trust as the centerpiece of your estate plan, you would act as the trustee while you are alive. As a result, there would be no loss access to the assets, and you would retain the right revocation.
Your heirs would be the beneficiaries of the living trust, and you would name a trustee to succeed you after your passing. This can be a family member or someone else that you know personally, and in fact, a beneficiary can be named as the trustee.
Another option is the utilization of a professional fiduciary like the trust department of bank or a trust company. The right choice will depend on your family dynamic and the way that you want the assets to be distributed after you pass away
If you have concerns about heirs with spendthrift tendencies, you can include a spendthrift provision to protect the assets.
The trust would become irrevocable after your death, and the beneficiaries would have no access to undistributed assets. This lack of access would also apply to their creditors.
You can prevent reckless spending by instructing the trustee to provide incremental distributions over time. For example, you could provide a certain dollar amount each month until the beneficiaries reach certain age thresholds.
Another benefit is the ability to prepare for possible incapacity. Over 30 percent of the oldest old contract Alzheimer’s disease, and there are other causes of dementia. You also have to consider the possibility of incapacity due to some other devastating illness or accident.
To account for this eventuality, you can name a disability trustee that would assume the role in the event of your incapacity.
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If you are ready to work with a Staten Island estate planning attorney to create a living trust, we are here to help. You can schedule a consultation appointment if you give us a call at 332-456-0500, and you can use our contact form if you would rather send us a message.
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- Own a Vacation Home Out of State? You Need a Living Trust - December 21, 2021