Estate Planning Advice If You Plan on Relocating

After moving between states, many people are overwhelmed and overlook critical estate planning steps. This can lead to undesirable estate planning results because different states treat issues like marital property and taxes differently. In these situations, it helps to understand some helpful advice about how to revise and update your estate plan.


# 1 – Estate, Gift, and Inheritance Taxes


Federal estate tax only applies to individuals with estates whose assets are greater than $11.58 million, but state estate and gift taxes can be placed on much lower asset values. Currently, 18 states and the District of Columbia place either state or inheritance taxes on both residents and non-residents with assets in the state. The tax rate as well as the amount of excluded assets, however, varies substantially between states. Most states do not place estate taxes on transfers to a surviving spouse. Whether you move into or out of a state that imposes an estate or inheritance tax, your estate plan might need to be revised to reflect the change in taxes. For example, the New York estate tax ranges from 5 to 16 percent and is substantially lower than the federal tax rate.


# 2 – Domicile Related Issues


It is critical to establish the state in which you are domiciled for tax-related issues including state income tax and state capital gains tax rates. New York is considered a high-income tax state. If you move to or from New York to a state that does not impose a state tax, it is critical to consider the potential ramifications. Additionally, a high-income tax state might challenge your domicile in an effort to tax your income. Remember, a person is considered a resident of New York state if that individual’s domicile is New York or that individual maintains a permanent place of residence in the state of New York for substantially all of the taxable year and spends at least 184 in the state during the taxable year.


# 3 – Irrevocable Trusts


If you are the beneficiary or trustee of an irrevocable trust, it is important to consider the ramifications of your new home state. Each state is responsible for assessing taxation. For example, if you are the trustee of an irrevocable trust and move to New York, your move will likely subject the trust to New York’s taxes.


# 4 – Marital Property


Marital laws perform a critical role in deciding how assets should be divided between spouses at the time of death or divorce. While nine states currently recognize property as community property, other states acknowledge common law property and treat each spouse’s property as individually owned. If you switch between these two types of states, it is important to understand how a change might impact your asset ownership. New York follows common law property rules and is an equitable distribution state, which means that a court divides marital assets in a way that is deemed to be fair.


Speak with an Experienced Estate Planning Attorney


The estate planning process is complex, but an experienced attorney can make it much less so. Do not hesitate to contact a knowledgeable lawyer at Ettinger Law Firm today to schedule a free case evaluation.

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