Before It’s Too Late - Eric Gullotta


Planning for assets outside California

Many California residents own real estate outside of the state. They may have a second home in Arizona, an investment property in Oregon, a shared condominium in Nevada or a timeshare in Hawaii. Why is this important? Because your state of domicile, which is the state you live in as your principal residence, is the state that has jurisdiction to administer your estate.

For just about everyone reading this, that state is California. If you have real estate outside of your domicile state then your children may have to deal with that particular state to get their inheritance.

Estate planning attorneys in California (and in any other states, for that matter) are licensed by the state in which they practice. Sure, some attorneys practice in two or even three states, but no attorney practices in all states. That means that your attorney only knows the rules of the state in which they practice. For our purpose here we will assume that state is California.

If you have assets in another state you must abide by the laws of that state regarding your property.  Those rules might be the same as California’s, but that is highly unlikely. Let’s say you try to take your power of attorney from California to South Carolina – you might be surprised to find out that South Carolina not only requires a notarized signature but also two witnesses as well. California requires only a notarized signature. This renders your California power of attorney useless in South Carolina.

You might ask, “Why don’t you just add two witnesses to all of your powers of attorney?” That is a valid question – but what about another state that requires three witnesses, or the state that requires four? The bottom line is that you can only prepare forms that conform to your state’s rules, because you simply can’t create a document that satisfies every state. In fact, I’d be willing to bet that some states have conflicting requirements making a “universal” form essentially impossible.

The use of a revocable living trust will alleviate most of these issues, if not all. Every state will recognize a trust and the fact that the acting trustee has legal power over that trust. With the use of a trust, you can circumvent the need for a power of attorney to transfer real estate and avoid the previously discussed problems. This also applies to selling real estate, borrowing against the real estate or simply leasing the property.

Another way to go is to prepare documents that are in accordance with the states in which you have real estate.  If you don’t want to create a trust then you could research the laws of the state where your property lies and draft your documents accordingly or you could hire attorneys in each state to draft documents for you. Arguably this is a more expensive approach due to its unique nature, but it is an option nonetheless.

If you own property in other states you should consider having your estate plan reviewed by a competent attorney in that state and discuss with them any potential issues that may arise from that ownership.

As I’ve said before, a little “preventative medicine” goes a long way in estate planning. Most issues can be resolved if you address them now, before it’s too late!

Eric S. Gullotta, JD, CPA, MS (Tax) focuses on estate planning and taxation law. His office is located at 232 West Napa Street, Suite A, in Sonoma. Contact him at 938.7234 or visit Gullottalaw.com.

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