Out of State Rentals and Trust Planning

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If you own rental property in another state, you already know that managing it from Atlanta can get complicated. Add estate planning to the mix, and things get even more involved. Many Atlanta property owners have investment real estate scattered across the country, from vacation rentals in Florida to long-term rentals in Tennessee or Texas. Without the right plan in place, those properties can create real problems for your family when you pass away. At Slowik Estate Planning, located in Atlanta, Georgia, we help clients build clear, legally sound plans that protect their out-of-state rental investments and make things easier for the people they love.

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Why Out-of-State Rentals Create Estate Planning Challenges

Owning rental property in multiple states sounds like a smart investment move, and often it is. But from an estate planning standpoint, it creates a problem that many property owners never think about until it is too late. When you own real estate in another state and you pass away, your estate may have to go through probate in every state where you own property. That process is called ancillary probate, and it can be slow, expensive, and frustrating for your family.

Think about it this way. Say you live in Atlanta and own a rental home in North Carolina and a condo in Florida. Your Georgia estate would go through probate here. But your North Carolina property would go through probate there, and your Florida property would go through probate in Florida, each under that state’s own rules and timelines. Your family could be dealing with three separate court processes at the same time, paying three sets of legal fees, and waiting months or even years before anything gets resolved.

There is also the question of what happens to rental income during that period. Who collects it? Who pays the mortgage, insurance, and property taxes while the estate is tied up in court? These are real, practical problems that a well-drafted estate plan can solve before they ever come up. An Atlanta estate planning lawyer at Slowik Estate Planning can help you look at your full picture, including every state where you own real estate, and build a plan that avoids these headaches entirely.

How a Revocable Living Trust Solves the Ancillary Probate Problem

The most effective tool for handling out-of-state rental properties in your estate plan is a revocable living trust. When you transfer your rental properties into a trust, those properties no longer pass through probate at all. The trust owns the property, and when you die, the successor trustee you named takes over and distributes or manages the property according to your instructions. No court involvement. No ancillary probate in other states.

Under the Revised Georgia Trust Code of 2010, found at O.C.G.A. Title 53, Chapter 12, Georgia law provides a solid framework for creating and administering trusts. Under O.C.G.A. § 53-12-25(a), transferring property into a trust requires a transfer of legal title to the trustee. For real estate, that means you will need to deed each out-of-state rental property into the trust. This step is critical, and it must be done correctly under the laws of the state where the property is located.

Once the property is in the trust, the trust itself can hold and manage it across state lines. The trustee has clear authority to collect rent, pay expenses, and eventually sell or distribute the property. Under O.C.G.A. § 53-12-4(b), Georgia law also recognizes that a trust’s validity may be determined by the law of the jurisdiction designated in the trust instrument, which gives you some flexibility in how your trust is structured when you own property in multiple states.

A revocable living trust also lets you stay in control during your lifetime. You can serve as your own trustee, manage the properties just as you do today, and make changes to the trust whenever you want. You can also coordinate your trust with your wills to make sure nothing falls through the cracks. Slowik Estate Planning can walk you through exactly how this works for your specific situation.

Trustee Duties and the Georgia Principal and Income Act

Once your rental properties are inside a trust, someone has to manage them. That is the trustee’s job. If you are serving as your own trustee during your lifetime, this is straightforward. But when you pass away or become incapacitated, your successor trustee steps in. Understanding what that trustee can and must do is important, especially when rental income is involved.

Under Article 11 of the Revised Georgia Trust Code (O.C.G.A. §§ 53-12-200 through 53-12-221), trustees have a duty to manage trust property with reasonable care and skill. They must keep accurate records, act in the best interests of the trust beneficiaries, and follow the terms of the trust document. For rental properties, this means collecting rent, maintaining the property, paying expenses, and keeping detailed accounts.

Article 17 of the Revised Georgia Trust Code, known as the Georgia Principal and Income Act (O.C.G.A. §§ 53-12-380 through 53-12-455), provides specific rules for how rental income is treated. In general, rental income is considered trust income and is typically distributed to income beneficiaries, while the property itself is considered principal and benefits remainder beneficiaries. This distinction matters a great deal when you have both a surviving spouse and adult children as beneficiaries, for example.

Under Article 12 (O.C.G.A. §§ 53-12-230 through 53-12-232), the trustee also has accounting duties. They must keep records and report to beneficiaries as required by the trust document or by law. For out-of-state rentals, this includes tracking income and expenses for each property separately, which is important both for trust administration and for tax reporting purposes. Good trust administration from the start makes everything run more smoothly for everyone involved.

Tax Considerations for Rental Income Inside a Trust

Taxes are one of the most important things to understand when you hold rental properties inside a trust. The rules depend on what type of trust you have and how it is structured. Getting this right can save your family a significant amount of money over time.

For a revocable living trust, the tax treatment during your lifetime is simple. With a grantor trust, all income, deductions, and credits are not taxed at the trust level but are reported on the grantor’s personal income tax return. So if your rental properties are in a revocable trust and you are the grantor, you report the rental income on your own Form 1040, just as you would if you owned the property directly. Cash or the fair market value of property or services you receive for the use of real estate or personal property is taxable to you as rental income, and in general, you can deduct expenses of renting property from your rental income.

Things get more involved with an irrevocable trust. For 2026 taxes (which you will file in 2027), the federal government taxes trust income at four levels, and these tax brackets also apply to all income generated by estates. Because trusts reach the highest tax brackets quickly, shifting income to beneficiaries often results in lower overall taxes, since individuals usually have wider income brackets. This is an important planning opportunity. If your trust generates significant rental income, distributing that income to beneficiaries in lower tax brackets can reduce the overall tax burden.

There is also the Net Investment Income Tax (NIIT) to consider. High-income taxpayers face an additional 3.8% Net Investment Income Tax on rental property gains, and according to IRS guidance on NIIT, this tax applies when modified adjusted gross income exceeds $200,000 for single filers, $250,000 for married filing jointly, or $125,000 for married filing separately.

Additionally, IRS Rev. Rul. 2023-2 clarified that assets held in an irrevocable non-grantor trust do not receive a stepped-up basis under IRC § 1014 at the grantor’s death, because those assets are not included in the grantor’s taxable estate. This matters for out-of-state rental properties that have appreciated significantly. The type of trust you use directly affects whether your heirs will owe capital gains tax when they eventually sell. For broader tax planning strategies related to your estate, Slowik Estate Planning also offers guidance on Estate Tax Planning in Atlanta Georgia.

Using an LLC with Your Trust for Out-of-State Rentals

One strategy that many rental property owners in Atlanta use alongside their trust is holding out-of-state properties through a limited liability company (LLC). Instead of deeding each rental property directly into the trust, you place each property (or a group of properties) into an LLC, and then the LLC membership interest goes into the trust. This approach has several practical advantages.

First, it simplifies the transfer process. When you own real estate in multiple states, deeding each property into a trust requires following the recording and transfer rules of each state where the property sits. But if the property is already inside an LLC, you only need to transfer the LLC membership interest into the trust, which is typically governed by the state where the LLC was formed. This can reduce paperwork, filing fees, and the risk of errors in out-of-state deed transfers.

Second, an LLC provides a layer of liability protection. If a tenant at your Florida rental is injured and files a lawsuit, the LLC structure can help protect your other assets from that claim. The trust, in turn, owns the LLC, keeping the membership interest organized within your estate plan.

Third, this structure can make trust administration cleaner after your death. The successor trustee does not need to manage individual properties in multiple states. They manage the LLC interests, which in turn hold the properties. This makes the whole process more organized and easier to handle.

Under O.C.G.A. § 53-12-25, transferring property in trust requires a proper transfer of legal title to the trustee. When you use an LLC, the membership interest becomes the trust asset, and the transfer is documented through an assignment rather than a real property deed. It is important to work with an attorney who understands how these structures interact under both Georgia law and the laws of the states where your properties are located. If you also have rental properties or assets abroad, International Estate Planning considerations may apply as well. Slowik Estate Planning can help you think through the full structure and make sure everything works together.

FAQs About Out-of-State Rentals and Trust Planning in Atlanta, Georgia

Do I need a separate trust for each state where I own rental property?

No. In most cases, a single revocable living trust created in Georgia can hold rental properties located in other states. You will need to deed each out-of-state property into the trust following that state’s specific transfer requirements, but you do not need a separate trust for each state. An attorney familiar with multi-state estate planning can help make sure each property is properly titled in the trust.

What happens to my out-of-state rental property if I die without a trust?

If you die without a trust and you own real estate in another state, your estate will likely have to go through ancillary probate in that state. That means a separate court process, additional legal fees, and a longer wait before your family can take control of or sell the property. Having a properly funded trust avoids this entirely by keeping the property out of the probate process.

Can my successor trustee manage and collect rent from out-of-state rental properties?

Yes, provided the trust document gives the trustee the authority to do so. Under O.C.G.A. §§ 53-12-200 through 53-12-221, a trustee has broad powers to manage trust property, including real estate. Your trust should be drafted to clearly authorize the trustee to collect rents, pay expenses, hire property managers, and make decisions about the property. A well-drafted trust document removes any ambiguity about what your trustee can and cannot do.

Will placing my rental properties in a trust affect my ability to deduct rental expenses on my taxes?

For a revocable living trust, no. Because you are treated as the grantor and owner for income tax purposes, rental income and expenses are still reported on your personal tax return. You keep all the same deductions you had before, including depreciation, repairs, property management fees, and mortgage interest. The IRS treats you as if you still own the property directly. For an irrevocable trust, the tax treatment is different, and you should discuss the specifics with both your attorney and a tax professional.

How do I get started with trust planning for my out-of-state rental properties?

The best first step is to contact Slowik Estate Planning for a consultation. Our Atlanta, Georgia office works with clients who own real estate in multiple states and need a clear, practical plan to protect those assets. We will review what you own, where it is located, and how it is currently titled, then help you build a trust-based plan that fits your goals and your family’s needs. There is no obligation, and getting started sooner rather than later makes the whole process simpler.

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