Approximately 3 million Americans move to another state each year. Given the stress and myriad changes that come with moving, it’s not surprising that many people forget to review their estate plans. However, differences between states regarding taxes, ownership of property, inheritance, and more make it extremely important to review, and if necessary, update your planning documents with an attorney who focuses on estate planning.
Let’s look at some of the legal issues involved when moving to a new state and the changes that may have to made to your plan.
With the current exemption on federal estate taxes set at $11.7 million for individual filers and $23.4 million for married couples filing jointly, most of us don’t have to worry about federal estate taxes (at least this year). Unfortunately, as of 2021, 11 states levy their own estate taxes, and exemption amounts are considerably less than the federal level. In addition, six states levy an inheritance tax and Maryland actually imposes both. The good news is that with proper planning, you may be able to minimize or even eliminate your estate’s vulnerability to state “death” taxes.
You can find a complete list of states with estate and/or inheritance taxes here: https://www.aarp.org/money/taxes/info-2020/states-with-estate-inheritance-taxes.html.
Key Planning Documents
Did you know that a valid will in one state may not be valid in another? The same is true of other important legal documents, including living wills, health care proxies, powers of attorney, and more.
What would happen if health care providers in your new state won’t recognize and accept the medical power of attorney or health care proxy you made in another state? Your agent or attorney-in-fact might not be able to do the job you trusted them to do. And while your loved ones might be able to take the matter to court to enforce a document’s validity so that your wishes will be carried out, a medical emergency is not the time to be dealing with courts or trying to enforce the validity of your legal documents.
When moving to a new state, it’s usually impractical and unrealistic to expect your helpers, such as your agent, attorney-in fact, or executor, to continue to serve in this capacity. We’ve mentioned the issues surrounding powers of attorney. In addition, the vast majority of states do not allow a non-resident to serve as an executor, and of those that do, the executor must be related to you directly. Other states have additional restrictions as well.
Finally, different states have different laws that govern community property, titling (which could impact your trusts), tenants by the entirety, and joint tenancy with or without right of survivorship.
The bottom line is this: If you are planning to move to another state, or you’ve already done so, be sure to speak with a qualified estate planning attorney to review and update your plan.