Moving can be a difficult and disruptive process. We sort through our belongings and reassess our needs. We pack up our dishes, our clothes, and our lives. Moving is an ideal time to plan for the future and to adjust plans we’ve already made. Moving across town can be difficult. Moving to another state adds another level of complexity.
Wills and Trusts
Generally, a will or trust which is validly executed in one state will continue to be valid in another state. However, there may be state-specific laws, which require adjustment to your estate plan for the optimal result.
Let’s look at a theoretical couple, Bill and Mary, who now live in Florida and are moving to California this year. Florida is a separate property state, in other words, property is either owned by the husband or the wife. California is a community property state, in other words, some property can be owned by the marital community itself. This is important because the tax attributes of community property are somewhat different than separate property. If Bill and Mary together purchased a stock in 1990 while in Florida, upon the death of one of them they would get a step-up in basis on one-half of the property. This means they would never have to pay income tax on the appreciation from 1990 until the date of the first spouse death on that one-half of the property. However, if they had changed the property to community property upon their arrival in California, they would have gotten a step-up for the entire property, not just one-half.
Powers of Attorney
Property powers of attorney, such as a general durable power of attorney, which were valid where executed typically are valid in the new state, as well. However, a power of attorney is used to facilitate the easy administration of assets. It is only as good as the willingness of people to accept it. While in theory it may be valid, if the language in the document varies considerably from what financial institutions in the new state regularly see, it may be difficult to use.
Health Care Power of Attorney
Documents giving others the authority to make decisions for you vary considerably from state to state. This is true especially of documents expressing wishes regarding the removal of life support. Each state can and does specify what is necessary to express those wishes. The required legal expression may be different in each state.
Income tax laws vary considerably from state to state. Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming have no state income tax. In New Hampshire and Tennessee, state income taxes are levied only upon dividends and interest income. In those states with an income tax, the highest tax rate ranges from 2.8% in Pennsylvania to 11% in Montana. In addition, cities may impose their own taxes. For example, Cincinnati imposes a 2.1% income tax and St. Louis imposes a 1% earnings tax.
Some income tax planning may prove helpful prior to the move. For example, Bill and Mary may want to accelerate income while they live in Florida (no income tax); this income then would not be taxable in California (high income tax).
After relocating to a new state, it is important to have an estate planning attorney review your existing estate planning documents to assure their continued validity. An estate planning attorney can help you plan for important tax and health care concerns that may be unique to your new state of residence.
Mr. Morrison is a board-certified estate planning attorney with experience in both simple and complex estate matters. He has been engaged in Louisiana trusts and estate law for the last 17 years. The firm has helped thousands of clients meet their estate planning goals and pass on lasting legacies to their loved ones. To learn more about how you can achieve your estate planning goals, please call (504) 831-2348 or visit our website at www.morrisonlawplc.com.