Many people will relocate to another state upon retirement. A very common question we get in our seminars is whether or not your estate planning documents will be “good” in the new state?
The answer to that question brings into focus the issue of which laws apply to the various estate planning documents, and most of the answers to those questions can be found in the main materials above. The following is a summary:
Power of Attorney: Your general Power of Attorney should be written in compliance with the laws of the state where you live. The United States Constitution does require each state to give full faith and credit to the laws of each of the states, so it should be “valid” in another state. However, in all cases for real property ( home, vacation or rental properties, investment property, timeshares, etc.), the law of where the land is located controls, so you should have a specific power of attorney for that property, written in compliance with the laws of that jurisdiction, or make sure your current power of attorney deals with that out-of-state property specifically. If a state has a statutory powers of attorney, you will need to do a new one for your new state, or do a new general Power of Attorney for that state. Once settled in your new state, it is a good idea to obtain a general and comprehensive Power of Attorney from a local attorney so that it will be in compliance with local law.
- Health Care Directives: Every state has enacted some kind of statutory Heath Care Directive authorizing the person(s) of your choice to make health care decisions for you if you should become unable to do so for yourself, and allowing you to make advance health care decisions for yourself. Because they are all written in conformity with Federal law and Supreme Court decisions, these documents are good anywhere in the country, regardless of which state’s form you have. Nevertheless, if you relocate to another state, you should get your new state’s statutory document so that your health care provider will be familiar with the form.
- Wills and Revocable Living Trusts: The validity of these documents is controlled by the law of the jurisdiction where they were signed, so if they are in compliance with that law, the state to which you relocate will almost always accept them as valid. However, the interpretation of the language in the document and the efficiency of the estate plan is controlled by the laws of where you live at the time of your death, so you should have a local lawyer review these documents, not necessarily to re-write them but, if necessary, to amend them for any local issues that might differ from the state where the documents were drafted. Some states have enacted differing versions of the Uniform Trust Act which may require changes in trusts from one jurisdiction to another.
- Beneficiary Designations: Retirement accounts and all Federal benefits are controlled by Federal law, so they continue in force, regardless of where you are living. Nevertheless, it would be smart to review them at the time of your relocating, to be certain that they still designate the individual(s) or entities that you want to receive these benefits. Some transfer-on-death or payable-on-death designations may be covered by state law, and you should discuss those accounts with your financial advisor.
- Federal Estate Tax: This tax is charged against the estate and is based on Federal law, and therefore it is not relevant where you are living at the time of your death.
- State Estate Taxes: Many states have their own estate tax, in addition to the Federal estate tax. This tax is also charged against the estate, and is assessed by the state where you are living at the time of your death, on all of your assets except for real property located in a different state and tangible personal property physically located in a different state, on which other state will assess its tax. Therefore, you should be certain that you understand your new state’s estate tax.
- State Inheritance Taxes: A few states still have an inheritance tax, charged against the recipient of an inheritance (except if the Will or Revocable Living Trust shifts the payment of that tax back to the estate or trust). Remember, the appropriate law is not where the beneficiary lives but where you (the decedent) live (except for real property located in a different state).
- Probate: Probate is controlled by the state where you are living (domiciled) at the time of your death (except for real property located in a different state, which is controlled by that state). When you move, a review of your Will or Revocable Living Trust will take into account differences in probate from your current to future state in making suggestions for changes. The statutory share election for a spouse is directly controlled by state law, so a relocation to another state could change these rights significantly.
- Overall Taxation: Although this is beyond the scope of this outline, Kiplinger has a State-by-State Guide to Taxes on Retirees, which may be helpful to you in determining the best state for you to retire to from a tax perspective.
The bottom line is, you should consult with a local estate planning attorney in your new state, to be certain that you understand the implications of local law as it applies to your existing estate plan.