We all have nightmares, of one sort or another. One of the down sides to our work is that we get to hear about a lot of the nightmares that come true. One of the up sides to our work is getting to help people solve those nightmares—or even prevent them in the first place.
Here’s one nightmare scenario we recently encountered. A father—let’s call him Tom—left his daughter—let’s call her Robin—everything in his will. Tom owned a home in Tennessee, where Robin had grown up, and he was also lucky enough to have a small home in Florida where he retired, as well as a condo in Southern California where he and his family sometimes vacationed.
At first Robin’s inheritance seemed like an extraordinary blessing—a final gift from a father who had already been loving and generous. That is, until the liquidation and settling of his assets began. At this point, the dream turned into a nightmare. This is because Tom failed to realize that each of his properties—in Florida, Tennessee, and California—all had to be settled under that state's probate laws. This meant Robin spent substantial time and money flying from state to state to meet with lawyers and bankers, and to be present in legal meetings. Each probate process also incurred substantial probate fees. The lawyers weren't inexpensive; neither were the state fees. And the emotional cost to Robin was perhaps higher than any of these. She was stressed out, overworked, exhausted—all in the midst of trying to cope with the grief her father's death had caused.
On the surface, inheriting multiple properties in different states may seem like a great problem to have—but the reality is that going through multiple probates in different states is expensive in every way. It costs time, money, and personal pain.
It's also unnecessary. Nobody wants to leave that kind of nightmare to their children. The good news is that you can keep your beneficiaries from this fate with a little careful estate planning. Because every state has its own probate laws, any property in that state owned by an individual has to be processed through that state's probate process after the owner's death. But you can avoid this. How? You can avoid necessity of multiple state probate proceedings by creating a living trust.