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A New State & Your Estate
People are not stationary - moving to a new state for work, family, or other reasons is a part of life for a great deal of individuals. What happens to an estate plan, though, when a person no longer lives in the state where their plan was created? Is the plan still valid in their new state? Although estate planning documents that were validly executed in one state should generally be valid in another, these instruments may need some modification. It is highly recommended that all executed documents be, at the very least, reviewed by an attorney when relocation occurs.
The laws that govern wills, trusts, powers of attorney, health directives, and state taxes differ from state-to-state. While a state normally will adhere to a document's terms and carry out the outlined plan, this is not always the case. Depending on state law, supplementary steps, clarification, or even additional language may be required in a document. Failure to adhere to the new state's requirements can result in a myriad of unintended consequences.
For instance, some states are community property states whereas others are common law states. The distinction is extremely important because it directly affects what each spouse is entitled to at death. Assets acquired in the new state may be subject to a different disposition scheme than assets that were acquired in the old state and not accounted for in the estate plan.
In addition, because plans are construed with certain state tax laws in mind, a move can result in frustration of your objectives if the new state has additional taxes or higher rates. Consider if in the old state no estate tax was levied, but in the new state an estate tax is levied on estates valued over $1 million - an estate plan that did not take this into consideration will be at risk for this additional tax liability, thereby reducing its value. However, a simple restructuring of your plan upon relocation will allow you to account for this unintended consequence.
Even if a document is legally sound, it may not be the best way to accomplish one's wishes. Health directives or "living wills" are highly dependent on state statutory law. Those in the health care field are undoubtedly familiar with the specific language contained in their state's living will, but may not understand the terms contained in an out-of-state form when faced with an urgent situation. This could prove to be disastrous in an emergency.
After moving to a new area, take the opportunity to review your plan with an estate planning attorney and make any necessary updates and/or revisions to ensure that your estate plan continues to carry out your objectives.
This article is intended as a summary of federal and state law and does not constitute legal advice.