Splitting your time between two homes can offer the best of both worlds: seasonal comfort, lifestyle variety, and greater personal freedom. But owning property in two states also creates unique estate planning challenges. If something happens to you and your affairs haven't been organized, your loved ones could face multiple probate proceedings, inconsistent inheritance rules, and costly legal delays.
Whether you're retired, semi-retired, or someone who enjoys spending part of the year in each location, it's important to ensure your estate plan reflects your multi-state lifestyle.
Dual Residency and Domicile: Why It Matters
If you live part of the year in North Carolina and the rest in New York, you might think of yourself as a resident of both. However, for legal purposes, you can only have one domicile, which is your permanent, primary home. The state where you're domiciled has the most significant control over how your estate is handled.
This distinction is critical because your domiciliary state governs your will, oversees the primary probate process, and applies its tax and inheritance laws to your estate. The other state, where you own your second home, may require ancillary probate to handle the property there, which adds another layer of legal and administrative work for your heirs.
Misunderstanding or ignoring domicile can result in serious consequences, including disputes between states over probate jurisdiction and even double taxation in some cases.
Establishing Clear Domicile: How Courts Decide
To avoid confusion after your death, it's essential to define your domicile while you're alive clearly. Courts examine several indicators to determine your legal home, such as where you vote, pay taxes, hold your driver's license, spend most of your time, and refer to as your primary residence in estate documents.
Conflicting signals, like filing New York income taxes while holding a North Carolina driver's license, can delay probate and open the door to disputes between family members or taxing authorities.
The Risk of Dual-State Probate
Owning real estate in both New York and North Carolina almost always triggers the need for two probate proceedings: one in your domiciliary state and one in the other state where your second home is located.
For example, if you pass away domiciled in Florida but still own a home in the Adirondacks, your estate will require ancillary probate in New York. The reverse is also true: someone domiciled in North Carolina with a Manhattan condo will still be subject to New York probate laws for that property.
Each court will require its filings, legal representation, and timelines, which means more complexity, cost, and delay for your family.
Different State Laws Mean Different Results
One of the challenges in multi-state estate planning is that each state has its laws governing inheritance and probate. While New York and North Carolina both follow similar general intestacy principles giving priority to spouses and children, there are essential differences in how they handle things like:
- The rights of half-siblings, stepchildren, or adopted relatives
- Rules for appointing executors or personal representatives
- Real estate transfer procedures
- State-level estate taxation
A strategy that works well in one state may not be effective in another. That's why estate plans for dual-state living must not only be valid but also strategic in both jurisdictions.
Planning Tools That Simplify Multi-State Estates
The best way to reduce the burden on your loved ones is to minimize or eliminate the need for probate. For those who own property in multiple states, several estate planning tools can help:
- Revocable living trusts: These trusts can help bypass probate for assets properly titled in the trust, even when those assets are located in another state.
- Transfer-on-death deeds (where available): These allow real estate to pass directly to a beneficiary without the need for probate.
- Joint ownership with right of survivorship: Property transfers directly to the surviving owner, though this tool should be used carefully to avoid unintended consequences.
- Healthcare directives and powers of attorney are enforceable in both states. Ensure these critical documents are recognized wherever you spend time.
Working with an estate planning attorney familiar with both New York and North Carolina law can help you select the right tools tailored to your specific property, family situation, and long-term goals.
Tax Implications for Multi-State Living
Another key consideration is how taxes will impact your estate. While New York has its own estate tax system, North Carolina currently does not impose an estate tax. This difference can affect decisions about where to establish domicile and how to structure your estate plan.
It's important to note that New York's estate tax exemption is lower than the federal exemption. Even modestly sized estates that exceed this threshold may be subject to state tax liability. With proper planning, such as utilizing trusts and lifetime gifting, you can reduce or eliminate exposure.
Unintentional triggers of tax obligations in both states can burden your heirs with extra legal and financial stress. A well-crafted estate plan ensures that only one state has taxing authority over your estate and ideally, it's the one that results in a lower burden for your beneficiaries.
Don't Wait for Probate to Sort It Out
Some people assume they can delay planning or leave details for their family to handle later. Unfortunately, that often results in confusion, delay, and unnecessary expense.
Courts will not infer your intentions if they're not clearly documented. And your loved ones may be left dealing with unfamiliar legal systems in two different states, at a time when they're already grieving.
Working with an attorney who understands both New York and North Carolina estate laws ensures that your plan reflects your lifestyle and protects your loved ones, regardless of where you reside throughout the year.