c. Avoidance of Ancillary Administration—If an individual owns real estate in several different states and dies with these assets held in his or her own name, it will be necessary to open an ancillary administration in the foreign jurisdiction. This could occur, for example, if an individual owned a home in both Kansas City and in Colorado titled in his name only. Assuming that Missouri is the domicile of the individual, it will be necessary to open a main probate estate in Missouri and an ancillary administration in Colorado upon his death.
“Although a decedent’s movables typically are subject to devolution and administration under the law of the state of the decedent’s domicile at death, the decedent’s immovable assets (realty) must be administered where located, which may necessitate an ancillary administration.” A. James Casner and Jeffrey N. Pennell, Estate Planning §2.7.2 (6th Ed, 1995) (citing Restatement (Second) of Conflict of Laws §§260, 236 (1971).
In some states, the domiciliary fiduciary (i.e., the personal representative appointed to administer the estate of the decedent where the decedent was domiciled (permanent residence) at the time of his or her death), may have limited power to act in another state and may be precluded from acting if it is necessary to open an ancillary administration in another state. See, e.g., MO Rev. Stat. §473.675(2000).
The mere fact of opening an ancillary probate estate in another state will incur additional probate costs but if it is necessary to appoint another personal representative for the ancillary administration, inefficiencies in administration are likely to occur. “The use of a revocable living trust can avoid ancillary administration of foreign assets as well as inefficiencies of administration provided the domiciliary personal representative of the estate and trustee are the same.” See Hood, et. al., supra, at 8-7.
In addition, the extra probate fees that would have been incurred with the opening of an ancillary probate estate can be avoided by the use of the revocable living trust.
To achieve this goal of avoiding ancillary administration it is absolutely essential that the real estate in the foreign jurisdiction be titled in the name of the trustee of the revocable living trust during the grantor’s lifetime, or, in the alternative and if permissible under the laws of the foreign jurisdiction, a beneficiary deed must be executed by the grantor transferring the real estate to the revocable living trust upon the grantor’s death. The beneficiary deed has become a popular non probate transfer device. If available in the state where the real estate is located, the beneficiary deed may be an attractive alternative to titling the asset in the name of the trustee of the revocable living trust especially if the grantor is married and desires to achieve some limited asset protection by titling the real estate as tenants by the entirety with his spouse but providing, through the use of a beneficiary deed, that the real estate will be transferred to the survivor’s revocable living trust.
d. Privacy—Shortly after Michael Jackson’s death, his alleged will surfaced and was immediately placed on the internet. Not surprisingly, he named a guardian for his children and then provided that his assets, after payment of debts, etc, are to be distributed to the trustee of his revocable living trust. In effect this will is what estate planning attorneys refer to as a classic pour over will.
A pour over will only operates on assets titled in the decedent’s name only and if most of the assets are already in the trust, such a will will have little impact. In fact estate planners often find it unnecessary to probate a pour over will because all of the decedent’s assets are already in the trust or, if not, made payable to the trust through non-probate transfer on death designations.
Unlike a will which is a public document, “secrecy of disposition designs can be achieved by using a Revocable…[living] …trust, as the instrument normally is not required to be filed as a matter of public record other than federal estate or state death tax returns…[which have there own” set of privacy rules]…Hood, supra at 8-7. Thus, unless the tabloid press pays someone (e.g., a beneficiary of the Jackson trust) for a copy of Michael Jackson’s living trust, the public will not be privy as to how he deposed of the assets in the trust.
e. Avoiding Will Contests—A revocable living trust frequently is much less prone to attacks to its validity than a will. There are several reasons why this is true. First, the formalities for execution of a will document are much more stringent than the execution requirements for the establishment of a revocable living trust. A quick look at the case law in this area verifies this conclusion as the overwhelming majority dealing with execution defects concern wills rather than living trusts.
Second, the revocable living trust, unlike a will, is not a public document. Thus, if the decedent leaves out some of his or her heirs as beneficiaries under his or her living trust, the disgruntled heirs may not know about the existence of a trust, or if they do, they will not be privy to its terms and may be unwilling to incur legal fees necessary to challenge the trust especially when the attorney they hire has no knowledge as to the terms of the trust itself.
Finally, if the revocable living trust has been established through the use of a third party trustee (as distinguished from a self declaration of trust) such as an institutional trustee, many courts will be reluctant to declare the trust invalid because to do so would call into question the validity of the transactions undertaken by the trustees since the trust was first established.
Hood Law Blog 