How to Include Vacation Homes in Your Estate Plan
If you are a resident of Indiana, that makes you what they refer to in the south as a “snowbird.” Like many “snowbirds,” you may have a vacation house somewhere warm where you can escape to the ocean. If you relish the cold, snowy weather, you might even have purchased a vacation home near a ski resort. Maybe your vacation home is in the southwest because you prefer the perpetually sunny skies and dry climate of the desert. Regardless of where your vacation home is located, if it is outside of Indiana you need to understand how ownership of that property fits into your estate plan. Toward that end, the Indianapolis attorneys at Frank & Kraft discuss how to include vacation homes in your estate plan.
What Happens to My Property After I Pass Away?
For most people, the primary incentive for creating an estate plan is the ability to determine what happens to their property and other assets after they pass away. Shortly after your death, the person appointed by you to be the Executor of your estate should initiate probate. Probate is the formal name given to the legal process that occurs after an individual’s death that ultimately serves to distribute the decedent’s assets.
If the decedent left behind a Last Will and Testament, the terms of that Will dictate how the estate assets are distributed; however, if the decedent died intestate (without a Will), the state intestate succession laws guide the distribution of assets to legal heirs of the estate. Before assets can be distributed though, assets must be inventoried and valued, creditors must be notified and provided an opportunity to file claims against the estate, and any challenges to the validity of the Will must be litigated.
In the absence of strategies aimed at avoiding probate, the probate of an estate can be a lengthy and costly process. Not only can probate hold up the distribution of assets to beneficiaries who may need those assets, but it can also diminish the overall value of the assets that are ultimately passed down to beneficiaries. Not surprisingly, probate avoidance is a popular estate planning goal. If your vacation home is located outside of Indiana, however, the strategies you are counting on to allow your estate to avoid probate may not work.
How Vacation Homes Are Handled during Probate
A common problem people make is to focus on probate avoidance tools and strategies in their estate plan without taking into account the existence of a vacation home located in another state. If you are an Indiana resident at the time of your death, your estate will be probated in the appropriate court located in your county of residence. All non-probate assets located in Indiana will be required to go through the probate process. If you managed to successfully integrate probate avoidance tools and strategies into your estate plan prior to your death, your estate may avoid probate entirely or at least considerably less time and expense will be devoted to probate after your death. A vacation home located in another state, however, will not be part of the Indiana probate process. Consequently, your estate could wind up having to go through an entirely separate probate process in the state where your vacation home is located.
How Can I Avoid an Out of State Probate?
The good news is that a properly drafted estate plan can eliminate the need for secondary probate for those people who own vacation homes out of state. Often, creating a revocable trust and transferring the home into the trust is the best way to resolve the problem. Talk to your estate planning attorney about how to avoid the need for probate if you own a vacation home in a state other than Indiana.
Do You Need Help Incorporating Vacation Homes into Your Estate Plan?
For more information, please join us for an upcoming FREE seminar. If you need help incorporating vacation homes into your estate plan, contact an experienced Indianapolis estate planning attorney at Frank & Kraft by calling (317) 684-1100 to schedule an appointment.
Paul Kraft is Co-Founder and the senior Principal of Frank & Kraft, one of the leading law firms in Indiana in the area of estate planning as well as business and tax planning.
Mr. Kraft assists clients primarily in the areas of estate planning and administration, Medicaid planning, federal and state taxation, real estate and corporate law, bringing the added perspective of an accounting background to his work.
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