19 Aug How to Include a Vacation Home or Out-of-State Property in Your Estate Plan

A vacation home isn’t just a place to escape the daily grind, it’s a home away from home that’s full of cherished memories. When it comes to estate planning, vacation properties require special attention. They may be subject to estate taxes and additional probate fees, unless you plan ahead. If you live in Arizona and have a vacation home or own property in another state, here’s what you need to know. 

1. Understand the Risks of Probate

If you pass away without an estate plan—even if you have a will—then your estate will need to go through probate. This long, expensive process can be a burden on your loved ones. And if you own property in another state, your estate may even have to go through probate in that state as well. 

For instance, if you live in Phoenix but own a condo in San Diego, your heirs may have to open probate in both Arizona and California. This can lead to additional legal fees, longer delays, and unexpected complications.

2. Consider Placing Your Vacation Home in a Trust

A living trust is one of the most effective tools for including out-of-state property in your estate plan. Since a trust bypasses probate, your vacation property can be automatically transferred to your chosen beneficiaries if you wish. Or, you can set up a trust that provides for the upkeep of the vacation home and preserves it for future generations. And with a revocable living trust, you retain full control of the property during your lifetime. 

3. Check State-Specific Property and Tax Laws

Every state has its own rules when it comes to property transfers, estate taxes, and inheritance laws. Here are a few things to keep in mind:

• Arizona has no state estate tax, but other states do. If you hold property in one of them, they may impose an estate tax. 
• Some states, including Arizona, recognize beneficiary deeds and transfer-on-death (TOD) deeds, while others do not. 
• Community property states like Arizona treat ownership differently from common law states. In a community property state, any real estate purchased during a marriage belongs to both spouses, no matter whose name is on the deed. In common law states, property is owned solely by the person whose name is on the title. So while your home in Arizona belongs to both you and your spouse, your vacation home may only belong to one of you. 

4. Decide How You Want the Property Used After You Pass Away

Vacation homes often have emotional value for you and your loved ones, so it’s important to be clear about your wishes ahead of time. When your beneficiaries understand what will happen to your home and vacation property after you pass, it can prevent a lot of misunderstandings.

Consider discussing the following questions with them:

• Should the property be kept in the family, sold, or rented out?
• Who will be responsible for maintenance, taxes, and insurance?
• Will multiple beneficiaries share ownership, or will one person inherit it?

5. Keep Your Plan Updated

Life tends to bring about many changes over the years. Properties get sold, new homes get purchased, and family dynamics may change. That’s why we recommend that you review your estate plan every time you refinance, retitle, sell, or purchase any property. 

Protect Your Real Estate with Help from an Arizona Estate Planning Attorney

Wondering if you should put your vacation home in a trust? Without proper planning, owning property in another state could cause unnecessary headaches for your loved ones. But don’t worry! The Phelps LaClair team can help you ensure that your property is handled exactly as you intend, without any unnecessary probate proceedings. 

We’ve been helping Arizona residents craft successful estate plans for over 40 years. Give us a call today to schedule a free consultation in Chandler, Mesa, or one of our other Phoenix Valley locations. 

Images used under creative commons license – commercial use (8/19/2025). Photo by Grant Durr on Unsplash