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Living in Two States? Update Your Estate Plan

Posted on: November 21st, 2014
estate planningOwning residences in multiple states might allow an individual to more easily change one’s state of residence, a strategy that could be beneficial if another state has more attractive tax laws and other benefits. 

For example, New York has a state estate tax, or “death” tax; Florida repealed its state estate tax on January 1, 2007.  If a New York resident owns a home in Florida, he might be inclined to change his residency to Florida and avoid New York’s state estate tax.

If you own real estate (including timeshares) in more than one state, avoiding probate becomes even more important. A few items individuals should consider discussing with their estate planning and tax lawyer are:
 
Revocable living trust. When structured and funded properly, a living trust can help individuals who own properties in multiple states avoid probate in each state. Property placed in trust during one’s lifetime is distributed according to the trust terms, with no legal requirement that the trust document be submitted to the court. Probate assets that are not transferred to a living trust during one’s lifetime are distributed according to the terms of one’s will or, if there is no will, according to state laws.  Probate administration requires that the will be submitted to the court so that it becomes a public document; thus, a will contest might be more likely than a challenge to a trust.  In addition, probate administration often involves lengthy and costly court proceedings.

Powers of Attorney. If an individual is spending significant time in more than one state, he or she should consider signing durable powers of attorney in each state. What might have been a carefully updated and complete power of attorney in one state might be ineffective in another. Some jurisdictions will not recognize powers of attorney prepared in other states. 

Health Care Powers of Attorney and Advance Directives. Likewise, individuals who spend significant time in more than one state should consider signing health care documents in each state. While most state laws provide that health care documents which were validly executed in another state are also valid in that state, it is possible that the state might not have such a statute or might consider the document invalid for some other reason. In addition, health care providers often are more familiar with health care documents prepared in the state in which they practice.

Tax planning. In addition to the estate tax consideration used in the example above, individuals should explore each state’s income tax laws. Our attorneys review at the following link how a ‘double income tax’ might be imposed under some circumstances, typically when an individual receives income from a state other than where he or she resides. 

Our estate planning attorneys review a few additional items individuals should address if they are moving out of state. Existing wills and trusts might need to be modified to preserve an individual’s goals and address state laws.
 
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