Guide to Estate Planning for California Homeowners with Vacation Properties Outside the State
Your out-of-state vacation home needs its own paperwork
Real estate follows the rules of the state it sits in, not the state you live in.
Say you die owning a condo in Scottsdale, and the deed has your name on it. An Arizona court has to sign off before anyone can sell it or put it in a child's name. It doesn't matter that you lived in Studio City for forty years, or that an Orange County court is already handling the rest of your estate. Arizona opens its own case. Lawyers call this an ancillary probate, and for your family, this is a second lawyer.
Photo by Alix Greenman on Unsplash
What that second case costs
California prices its half plainly, because the fees are set by statute. Probate Code sections 10800 and 10810 use the same sliding scale: 4 percent of the first $100,000, 3 percent of the next $100,000, 2 percent of the next $800,000, then 1 percent after that. The attorney collects that amount, and the executor collects it again. On a $1 million estate, that's $23,000 and another $23,000.
Here's the part people don't see coming. The fee runs on gross value, so your mortgage doesn't reduce it. A house worth $1.2 million with $700,000 still owed gets billed as a $1.2 million house.
Then add whatever the other state charges. That varies a lot, and it's worth asking about early rather than guessing.
The fix is boring
One revocable living trust can hold property in as many states as need. You stay in charge while you're alive. You can sell, refinance, rent it out, or change your mind.
When you die, your successor trustee handles all real property under that one document. No court in any state.
That's the whole strategy. It works because states generally recognize a trust created somewhere else. It's not clever and it's not new, which is why it's a little strange how many people skip it.
The step people skip
Signing a trust doesn't move anything into it. You have to record a new deed for each property, in the county where that property sits.
Your California deed and your Arizona deed are different documents with different formatting requirements. You can't file a California form in Maricopa County and expect it to record. Most people hand the out-of-state one to a local attorney or title company. That bill is small next to the probate you're skipping.
Two things to handle while you're at it:
Tell your lender. This is optional as the law prohibits a mortgage being called when a property is transferred into the owner’s own revocable living trust. However, the company may have a process for noting the transfer if you would like to follow it.
Tell your insurer, so the policy lists the trust as owner. This step is more critical to ensure there are no issues with the insurance if you need to make a claim.
If you signed your trust before you bought the vacation place, that property is almost certainly not in it. This is the most common way a good plan quietly stops working.
Side by side
Vacation home in your trust, or in your own name?
| Feature | In your trust | In your own name |
|---|---|---|
| Avoids probate in the other state | Yes | No, a separate case opens |
| Who handles it | Your successor trustee | Two courts, often two attorneys |
| How long your family waits | Weeks to months | Set by two court calendars |
| Stays out of public record | Yes | No, public in both states |
| Stepped-up basis at death | Yes | Yes, the same |
| California property tax reassessment | Prop 19 applies | Prop 19 applies |
The bottom two rows are ties. A trust doesn't help you there, and anyone who tells you otherwise is selling something.
Prop 19, for the California side
Proposition 19 governs property tax on your California house. It has nothing to say about the one in Nevada.
Your children can keep your low tax base on your primary residence, but the requirements are strict. One of them has to move in as their own principal residence within a year of the transfer and file for the homeowners' exemption in that same year. Even then, there's a ceiling. For transfers between February 16, 2025 and February 15, 2027, the exclusion covers your factored base year value plus $1,044,586. Value above that gets added to their new assessment. The Board of Equalization resets that figure every two years, so check it when the time comes.
And if your second home happens to be in California rather than out of state, there's no parent-child exclusion for it at all. Not a reduced one, but none at all. It gets reassessed at market value no matter what your kids do with it afterward.
Taxes where the other house is
California charges no estate tax and no inheritance tax. The other state might do both.
Five states charge an inheritance tax, which the person inheriting pays: Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania. Iowa used to be on that list and came off it for deaths on or after January 1, 2025.
A different group charges estate tax, and some thresholds are low enough to matter. Oregon starts at $1 million. Massachusetts starts at $2 million. A paid-off house plus a retirement account can clear either one.
Federal estate tax is a smaller worry than it was. The exemption is $15 million per person in 2026, or $30 million for a married couple with the right election. If you read something a couple of years ago about the exemption getting cut roughly in half at the end of 2025, you no longer have to worry about that: Congress removed that sunset and raised the number instead.
What a trust doesn't change
Your heirs get a stepped-up basis either way. When you die, the property's tax basis resets to its market value on that date, so your family can sell without owing capital gains on all the years you owned it.
That happens whether the house sat in your revocable trust or in your own name. It's a real benefit; it just isn't a reason to pick one over the other.
Four things to do this month
Pull the deed for the vacation property and read the name on it. If it says you and not your trust, you found your problem.
Do the same for your California house. People often get one right and miss the other constantly.
Look up whether the state your second home is in charges estate or inheritance tax.
If either deed is wrong, fix it now. Recording a deed while you're alive takes a couple of weeks. Probate typically takes well over a year.
If you're not sure what your current documents actually say, bring them in. We'll read them with you. Laurel Trust Law has offices in Studio City and Mission Viejo.