Can a Florida Trust Own Property in Another State?

A Florida trust can own real property in any state. All 50 states recognize the validity of trusts created in other jurisdictions, so a trust established under Florida law can hold title to real estate in New York, California, Texas, or any other state without creating a separate trust in that state.

The primary estate planning reason for holding out-of-state property in a trust is to avoid ancillary probate. The asset protection implications are more complex and depend on which state’s laws govern creditor claims against the trust property.

Avoiding Ancillary Probate

When a Florida resident dies owning real property in another state, the property must go through probate in that state. Each state where the decedent owned real estate requires its own probate proceeding, known as ancillary probate. Ancillary probate adds legal fees, delays, and administrative burden for the decedent’s family.

Transferring out-of-state real property to a living trust eliminates ancillary probate for that property. Because the trust, not the individual, holds legal title, the property passes to the trust beneficiaries according to the trust terms without any court involvement in the state where the property is located.

For Florida residents who own vacation homes, rental properties, or undeveloped land in other states, holding those properties in a trust is one of the most practical planning steps available.

How to Transfer Out-of-State Property to a Trust

Transferring out-of-state real property to a Florida trust requires compliance with the deed recording laws of the state where the property is located. Florida law governs the trust itself, but the other state’s law governs the transfer of real property within its borders.

Each state has its own deed requirements, including specific language, notarization standards, and recording procedures. Some states impose transfer taxes on deed recordings, though many exempt transfers to the grantor’s own revocable trust from documentary stamp or transfer taxes. The deed must name the trust correctly, including the trustee’s name, the trust name, and the date of execution.

A Florida trust does not need to register or qualify in another state to hold property there. The trust simply takes title through a properly prepared and recorded deed. However, the trustee should verify whether the other state imposes income tax on rental income or capital gains generated by property within its borders, because those state tax obligations follow the property regardless of where the trust is domiciled.

Creditor Protection for Out-of-State Property

The asset protection analysis for out-of-state property held in a trust involves a choice-of-law question. Two different legal frameworks may apply: the law governing the trust and the law of the state where the property is located.

Trust Governance

Florida Statutes § 736.0107 allows the trust instrument to designate the governing law, provided there is a sufficient nexus to the designated jurisdiction. A Florida trust that designates Florida law as its governing law will generally be administered according to Florida trust statutes, including the creditor protection provisions for spendthrift and discretionary trusts.

Real Property Situs

Real property is governed by the law of the state where it is located—the situs state. If a creditor obtains a judgment and seeks to enforce it against real property held in a trust, the situs state’s laws determine whether and how the creditor can reach the property.

Most states have trust creditor protection statutes similar to Florida’s, including spendthrift and discretionary distribution protections. However, the specific rules vary. Some states offer stronger protection than Florida, while others offer weaker protection or have exceptions that Florida does not recognize.

For example, a Florida irrevocable trust holding property in a state that does not recognize discretionary distribution protection could leave that property more exposed to creditor claims than property held within Florida. Conversely, property held in a state with strong trust protections may receive enhanced protection compared to Florida law.

Revocable Trust Limitations

A revocable trust holding out-of-state property provides no creditor protection regardless of where the property is located. Under Florida Statutes § 736.0505(1)(a), all property in a revocable trust remains subject to the settlor’s creditors. The situs state’s laws do not override this result because the fundamental issue is the grantor’s retained control, which every state recognizes as eliminating creditor protection.

A revocable trust remains the right choice for out-of-state property when the sole objective is ancillary probate avoidance. When creditor protection is also a goal, an irrevocable trust or an alternative structure should be considered.

Irrevocable Trust Considerations for Multi-State Property

An irrevocable trust holding out-of-state real property raises several practical issues that do not apply to Florida-only property holdings.

Trustee authority in the situs state must be confirmed. Some states restrict the activities of out-of-state trustees or impose registration requirements for trustees who manage property within their borders. The trustee should verify that they can legally manage the property under the situs state’s trust code.

Insurance and property management require local compliance. The trustee must maintain property insurance naming the trust as the insured, comply with the situs state’s landlord-tenant laws if the property is rented, and file any required state tax returns for income generated by the property.

Fraudulent transfer analysis must account for both Florida law and the situs state’s fraudulent transfer statute. If a creditor challenges the transfer of out-of-state property into a trust, the court may apply the situs state’s voidable transactions statute rather than Florida’s. Statute of limitations periods and burden of proof standards can differ between states.

Using an LLC Inside a Trust

Florida residents who own multiple out-of-state properties often hold each property through a separate limited liability company. The LLC holds title to the property, and the trust holds the membership interest in the LLC.

The two-layer structure serves several purposes. The LLC provides liability protection for the property owner against claims arising from the property itself, such as a tenant injury or environmental liability. The trust provides creditor protection for the LLC membership interest against the owner’s personal creditors.

The LLC also simplifies multi-state trust administration. Transferring an LLC membership interest does not require recording a new deed, paying transfer taxes, or complying with the situs state’s real property conveyance laws. The property remains titled in the LLC’s name regardless of who owns the LLC.

When the LLC membership interest is held inside an irrevocable trust with spendthrift and discretionary distribution protections, the combination of charging order protection at the LLC level and trust creditor protection at the trust level creates overlapping barriers that are extremely difficult for a creditor to penetrate.

Tax Considerations

Florida imposes no state income tax, but the situs state may impose income tax on rental income, capital gains, or both. Holding out-of-state property in a Florida trust does not eliminate the situs state’s taxing authority over income generated within its borders.

For irrevocable trusts, the situs state may also assert taxing jurisdiction over the trust itself based on the location of the trust property, the residence of the trustee, or the residence of the beneficiaries. Some states tax trust income based on the settlor’s residence at the time the trust was created, regardless of whether the settlor later moved to Florida.

Careful structuring of the trust’s situs designation, trustee selection, and property ownership format (direct ownership versus LLC) can minimize state tax exposure while preserving the trust’s asset protection features. Coordinating these decisions across multiple states requires attention to both the trust’s governing law and each state’s treatment of trust-owned property.