Understanding Estate Laws: Domiciliary Vs Ancillary

When a person dies, their estate goes through a probate process, which involves wrapping up their final affairs, including paying off any debts, and distributing any remaining property to beneficiaries or heirs. If the deceased owned property in more than one state, two different probate proceedings may be necessary: a domiciliary proceeding and an ancillary proceeding. A domiciliary proceeding is the administration of the estate in the state and county of the deceased's residence, while an ancillary proceeding is the administration of the estate in a non-resident state where the deceased owned property. This means that the laws of the state where the property is physically located typically govern what happens to that property when the owner dies, not the laws of the state where the deceased lived at the time of death.

The primary probate proceeding

During the primary probate proceeding, the court establishes the validity of the will and admits it into probate. The court then appoints the executor named in the will to manage the estate. The executor's responsibilities include locating the property, paying any outstanding debts, and distributing the property according to the instructions in the will. The primary probate proceeding usually takes place in the decedent's state of residence, and the court is responsible for verifying the validity of the will and naming an executor.

While the specific process may vary depending on the state and local laws, the primary probate proceeding generally follows a similar structure across different jurisdictions. It is important to note that the primary probate proceeding only has jurisdiction over property within its state, and separate ancillary probate proceedings may be necessary for property owned in other states.

Overall, the primary probate proceeding is a crucial step in the administration of a deceased person's estate, ensuring that their wishes are respected and their assets are distributed according to their instructions. By following the established legal processes, the primary probate proceeding helps provide closure and resolve any outstanding matters related to the estate.

The role of the executor

The executor's primary responsibility is to the beneficiaries, and they must not go against the terms of the will. They are tasked with registering the death, locating the original will, arranging the funeral if no one else does, taking responsibility for the property, and notifying banks and financial institutions of the death. They must also complete and submit inheritance tax forms and pay any inheritance tax due on the estate.

One of the first duties of an executor is to identify and gather all the assets owned by the deceased. If the deceased owned property in another state, the executor will need to open a separate probate process in that state, known as ancillary probate. Ancillary probate can bring additional costs and complexities, as the executor may need to hire an additional lawyer and navigate the laws of the other state.

Executors must act with care and diligence, ensuring they do not distribute any of the estates to beneficiaries before making the appropriate checks. They are personally responsible for sorting out the money and assets of the deceased and ensuring all debts are paid off before distributing the remaining assets to the beneficiaries. If an executor fails to follow the terms of the will, they can be held personally liable and sued for any losses incurred by the beneficiaries.

The domiciliary probate process

The appointed executor will then need to identify and gather all the assets owned by the decedent. If the decedent owned property in another state, the executor will need to open probate in the court where the out-of-state real estate is located, initiating the ancillary probate process.

The domiciliary probate court will verify the validity of the will and, once the will is accepted, the court in the ancillary probate proceeding will usually accept it without further proof. This is called a "foreign will". The court where the property is located will then use the will to determine who should receive the property.

Ancillary probate disadvantages

Ancillary probate is a secondary probate process that occurs simultaneously with the primary probate process in the decedent's home state. It is required when the decedent owned property in another state, as the primary probate court has no jurisdiction over out-of-state property. While this process is necessary to transfer ownership of out-of-state property to beneficiaries, it does come with several disadvantages.

One of the main disadvantages of ancillary probate is the increased cost. Executors often need to hire additional lawyers who are licensed in the state where the ancillary probate is taking place, leading to higher legal fees. There are also additional court fees and filing fees, which can deplete the financial reserves of the estate. This means there will be less money left for the inheritors of the estate.

Ancillary probate can also cause delays in the distribution of assets to beneficiaries. The process of settling the estate takes longer due to the need for two simultaneous probate proceedings, and beneficiaries may have to wait longer to receive their inherited property.

Another drawback of ancillary probate arises when the decedent dies without a valid will, known as dying intestate. Intestacy laws vary slightly across states, and it is possible that the rightful heirs determined by the primary probate court may differ from those determined by the ancillary probate court. This can create a major complication in the distribution of assets.

To summarise, while ancillary probate is necessary to handle out-of-state property, it comes with several disadvantages, including increased costs, delays in asset distribution, and potential complications in cases of intestacy. These disadvantages highlight the importance of careful estate planning to avoid the need for ancillary probate whenever possible.

Avoiding ancillary probate

Ancillary probate is a mechanism of having two probate proceedings going on at the same time in different states. It is often required when a decedent owned real estate or tangible personal property in another state. The laws of the state where the property is physically located govern what happens to that property when the owner dies, not the laws of the state where the decedent lived at the time of death.

• Joint ownership: If you own property jointly with another person, for example, by joint tenancy with the right of survivorship, tenancy by the entirety, or community property with a right of survivorship, the property will automatically pass to the joint owner without the need for a probate proceeding.
• Transfer-on-death deed: A few states allow you to file a special type of deed that will not become effective until your death. The person(s) named in the deed automatically receives ownership of the real estate only upon your death, and a probate proceeding is avoided.
• Revocable living trust: If you transfer the title of the property located in the other state into a revocable living trust during your lifetime, you can avoid ancillary probate. This is because the trust, not you, owns the title to the property. If you want to avoid probate altogether, you can also transfer your accounts and title to property located in your home state to the trust.
• Ownership in a business entity: If you own or plan to own a business entity, such as a limited liability company (LLC) or a corporation, consider transferring your property to your business property. This will legally convert the property from real estate into corporate property, helping you avoid ancillary probate.
• Beneficiary accounts: Beneficiary accounts are financial accounts that allow the owner to name one or more beneficiaries. When the owner passes away, the account is automatically transferred to the named beneficiary or beneficiaries. Accounts that transfer in this manner are not included in the decedent’s probatable estate.

Frequently asked questions