As autumn ends its brief run in Western New York, many snowbirds are preparing for their annual trek to Florida. Those who own condos or timeshares may not realize that there are estate administration implications for New York residents who own real property located outside New York. Such individuals may want to consider estate planning options to save time and expense for loved ones who will administer their estates.
New York has jurisdiction to administer any New York real property that a New York resident owns outright in his or her individual name. It cannot administer a New York resident’s real property located outside of New York. An ancillary proceeding generally must be filed in the state where the real property is located. This ancillary proceeding is secondary to the New York probate proceeding and is required for the sole purpose of administering the out-of-state real property. Absent an ancillary proceeding, the estate will not have the authority to take any action with respect to the out-of-state real property, including transferring title or even entering into a contract for sale.
While some states have relaxed procedures for administering a non-resident’s real property, Florida’s requirements are generally more stringent. The two main types of Florida ancillary proceedings are summary administration and formal administration. A summary administration proceeding is only available where the decedent’s Florida property does not exceed $75,000 in value or the decedent has been dead for at least two years. If the estate does not qualify for a summary administration proceeding, Florida will require the filing of a formal administration proceeding which involves additional notice and accounting requirements.
The length of Florida’s ancillary proceedings vary depending on the complexities of each estate. Normally, summary proceedings take one to four months while formal proceedings can take six months or longer to complete. The costs of Florida ancillary administration can also quickly add up. In addition to filing fees, estates will incur attorneys’ fees. This is because, except in a limited circumstance, an estate must be represented by an attorney admitted to practice in Florida. Most estates, therefore, will need to retain the services of a licensed Florida attorney in order to file an ancillary proceeding.
The following example illustrates some of the potential costs and time restraints involved in a Florida ancillary proceeding.
Mary is a New York resident. Years ago, Mary and her husband purchased a Florida condo as joint tenants by the entirety, but she now owns the condo outright since her husband’s passing. The Florida condo is valued at approximately $180,000. Her will provides that her entire estate, including her Florida real property, will pass to her two children in equal shares. If Mary died while title to the Florida condo remained in her name only, her executor would need to file both a New York probate proceeding and a Florida ancillary proceeding to administer the Florida condo. Because the Florida condo is valued over $75,000, the executor must file a formal administration proceeding.
The executor would also need to retain a licensed Florida attorney. It could take six months or longer before the ancillary proceeding is finalized.
New York residents such as Mary can avoid these types of costs and time constraints by proactively taking steps to avoid an ancillary proceeding. This can be achieved by turning the Florida real property from a probate asset to a non-probate asset that will not be subject to estate administration.
One option to make the Florida real property a non-probate asset is to sign a deed adding a joint owner with right of survivorship to the real property. Upon the death of a joint owner, title will automatically transfer to the surviving joint owner by operation of law.
For example, Mary could add her children as joint owners of her Florida condo so that, upon her death, her children would automatically take Mary’s interest without the need to file an ancillary proceeding.
It is important to note, however, that joint ownership may have gift and estate tax implications. Joint ownership also exposes the property to potential judgment creditors of the joint owners and may be considered marital property if one of the joint owners is subject to a divorce proceeding. These risks should be considered before opting for joint ownership.
A second non-probate option is use of a life estate deed. In a life estate deed, the life tenant retains a life estate interest in the property that allows the tenant full use of the property during his or her lifetime. The life tenant will name a remainder beneficiary who will automatically receive the property after the life tenant’s death. In New York, the remainder beneficiary is deemed to hold the legal title to the property and therefore the life tenant will need the remainder beneficiary’s consent to sell or mortgage the property.
Florida, however, recognizes an enhanced life estate deed, or Ladybird Deed. This is unique in that it allows the life tenant to retain more control over the property during his or her lifetime, so that the life tenant does not need the remainderman beneficiary’s consent to sell or mortgage the property.
Going back to our example, Mary could avoid an ancillary proceeding by use of a Ladybird Deed where she retains a life interest in her Florida condo while naming her children as the remainder beneficiaries.
A third non-probate option is to transfer title to the Florida real property from the owner’s individual name to a Florida revocable trust agreement. The terms of the Florida revocable trust will govern the disposition of the Florida real property upon the grantor’s death. A benefit of this type of trust is that it is not permanent and can be amended at any time. Thus, Mary could also transfer the title of her Florida condo to a Florida revocable trust agreement where she names her children as beneficiaries to receive the Florida condo upon her death. This would again achieve the purpose of avoiding an ancillary proceeding to administer her Florida condo.
As these options illustrate, New York residents can take practical steps that avoid ancillary administration and help ease the burden for those who will be administering their estates.
Katherine Liebner is an attorney and shareholder at Gross Shuman P.C.: kliebner@gross-shuman.com.