The Importance of Updating Your Estate Plan After Relocating
Moving to your dream neighborhood is exciting after planning for it for a long time. A good neighborhood helps you make new friends and advance in life. But moving to a new place comes with a new set of rules and laws that you have to abide by.
Furthermore, some things change when you move to a new estate. For example, you could have married or changed plans for the future. For this reason, you have to make your estate plan for relocating.
Preparing estate planning documents is not easy and requires a lot of money. You must involve an experienced attorney, like Sarah S. Shepard to help make the administrative details. After developing the estate plan, you don’t keep it and wait for its execution.
But why is it important to update your estate plan after relocating?
Keeps The Wills Updated
As you change estates, so will your life change. The will updates are necessary because the new estate laws can differ from your previous ones. With the updates, it can be easier to execute the will in the new estate.
Remember, your heir or attorney will rely on the new state's laws to prove the will's validity. In some instances, attorneys from both states might have to give their opinions. This can complicate matters if you have to work with the laws of the previous home estate only.
For example, the marital property rules change when you move from a communist state to a common law state after marriage. Generally, what you and your spouse own in a community property state is considered to belong to both of you. However, things change in other states where married couples own what’s under individual names.
As a couple, when you move to a different state, you can wish to change the ownership of the properties in your will. You can achieve this after updating the will after relocating.
The other thing that you should update is the people listed in your will. Your estate executor and power of attorney can change because of circumstances.
Changing your estate plan also helps to name the right legal guardian for your kids and pets in your will.
The people you need to update in your will include:
Power Of Attorney
A power of attorney can act on your behalf when you can’t speak or act for yourself. They can make medical decisions for you, access your bank accounts, and sell your assets. Your power of attorney can be your child, sibling, spouse, or close friend.
As you relocate, it's best to change this person, especially one closer to your new home. Let your power of attorney be easily reachable to come to your aid at any time without making longer trips.
Executor
An executor is a legal estate representative. They ensure all your debts, taxes, and assets are taken care of after death. The executor also helps execute the will by giving the named people in the will what’s in their name.
Every state has rules regarding who can be your executor. For example, in Florida, your executor has to be related to you by blood or marriage or be a resident of the state. So, if you are from New York and your executor is from that area, the Florida probate court won’t allow them to serve.
Also, remember that the states that allow out-of-state executors have other legal requirements, like bonds, that make it hard for them to serve. It will also be challenging for the out-of-state executor to handle the logistics and details of your property. All these prove why an update is necessary after relocating.
This means you have to update the will to include the right executor. Look for the best estate planning in Huntsville, AL, to have the right executor.
Legal Guardian
It’s also important to look into the legal guardian in your wills for your kids and pets. The legal guardian must be someone you trust and who is close to you. When you move to a different area, your previous choice might not be as close or as reliable.
Get a legal guardian who understands and protects your kids based on the new environment. Such a person will have the kid’s interests, like friends and preferred school, at heart.
Enables You Pay the Right Estate Taxes
You should also update your estate planning documents to be tax compliant. Remember, every state has its tax brackets, benefits, and rules. The documents also offer gift amounts free of state or other transfer taxes.
The law of your new area can dictate a change in tax amounts and who benefits from your estate. Married couples have different fundings like “credit shelter” and bypass” trusts which helps when one is dead. The funds for these trusts can allow the deceased free of transfer tax on their estate property.
However, if couples relocate to an area like California that doesn’t deduct a state-level estate tax, things will be different. The same amount can cater to the full amount of the federal estate tax in California.
Note that the move can be both advantageous and disadvantageous. This is because every state presents its own tax rules and benefits, which apply differently depending on how the couple’s documents are drafted.
Helps Domicile the State
You will also be able to make your new home your domicile after updating your estate plan. Doing this will help you with your income tax. This is especially important if you decide to retain the former residence and will visit regularly.
However, some states dispute the residency of those willing to maintain their residence to enable them to assess income tax. So, it’s better to create good ties with the new state to make it your domicile state.
Upholds The Irrevocable Trusts
After changing domiciles, the tax treatment of your irrevocable trusts might be affected. This is because the laws of most states consider the residency of the trust creator, beneficiaries, and trustees when deciding if the trust should pay income taxes.
You should contact your wealth advisor to check your existing trust document to know if choosing a domicile will affect your income tax bracket. You can also change the trustee and the trust’s status.
Prevents The Living Trusts from Probate
The living revocable trust works differently from wills and remains valid in any state. However, you need to keep it updated, despite where you signed it. This is more important after buying real estate in the new estate. So, include it in the trust to prevent it from going through probate when you die.
It helps Maintain the Beneficiary’s Designation
Even though you don’t need to change the retirement accounts after relocation, updating the designation is good. You should discuss this with your employer and the financial institution responsible for your retirement beneficiary plan. Also, check if the current beneficiary designation covers the trust on the updated will or revocable trust.
Enables The Right Titling of Assets
Additionally, you will have your assets under the right titles. For example, if you are relocating from a community property state, the updates are necessary to allow for any other necessary planning. Changing community property to a jointly owned property will reduce the surviving spouse's “step-up” tax.
Remember, if the first spouse dies in a community property, the property gets a 100% step-up tax based on the asset’s value. But this changes if it’s a jointly owned property, as 50% of the deceased spouse’s investment gets set up after death.
The states with such laws include:
Idaho
New Mexico
Wisconsin
Texas
Arizona
Nevada
California
Washington
Louisiana
It makes It Easier to Access Local Medical Providers
Not all states accept the advance medical directives signed by other states. In some states, without laws on medical directives, it becomes hard to get help from local healthcare providers. This is because they don’t accept out-of-state documents. To avoid such frustrations, updating your advance medical directive documents to the ones the local providers can take is best.
Moreover, every state has its own forms that differ from the rest. In some states, the healthcare directive and power of attorney are the same documents. But in other states, the documents are different. So, it will be confusing to work with a document that has separate forms. But this will be easier after we do the updates.
Work With Sarah S. Shepard, Huntsville Attorney
As you go to a new state, expect to work under new laws. Such changes require you to update your estate plan to have an easy time operating in the new home. An updated estate plan will help you pay the right estate taxes and access local healthcare providers. It will also prevent court probate and allow you to make the new home your permanent residence.
Are you planning to relocate to a new area around Huntsville? Let Sarah S. Shepard help document your wishes to give your trustees an easy time. We will ensure your children are cared for even after your death through the updated estate plan.
We ensure you do this without struggles as we create a good client-attorney relationship. Our work also entails updating you on state law changes and advice where necessary. This will help you make informed decisions that will protect your family throughout.