Should I Sign New Estate Planning Documents When I Move to a New State?

Transcript

Hello, my name is Jonathan Michael. I’m an ACTEC Fellow from Chicago, and I’m here with Anita Sarafa, also an ACTEC member from Chicago. Today we’re going to discuss the issue of changes in residency and how it may impact your estate plan documents. Hello Anita.

Effects on Estate Documents When Moving to a New State

Hello. Anita, I know that part of your business, you travel throughout the United States and counsel clients on all kinds of issues. How often does this issue of a change in residency pop up for you?

Anita Sarafa: Pretty frequently, actually, Jonathan. I travel mostly across the Midwest, and it is very common for me to get a call from a client saying that they are considering making a move to a Sun Belt state. So, as you’re talking to clients, what are some of the reasons that they offer as to why they’re considering a change in jurisdiction?

Jonathan Michael: So, as you’re talking to clients, what are some of the reasons that they offer as to why they’re considering a change in jurisdiction?

Anita Sarafa: Well, better weather is a big reason that I get from clients, especially as clients are moving into retirement years, but there are often overlapping reasons. So, other reasons clients might make a move is because of a job change, perhaps moving to be closer to family, maybe having better access to health care, but clients also cite to me that they’re interested in having a better tax regime in their new states. So, many clients are interested in moving to a state that may have better state income and/or estate taxes. So for clients, you know, tax reasons don’t usually drive major life decisions, but they do inform them. So, some states are better to live and work and raise your family in, and others are better to retire and die in. With regard to income taxes, you know, a lot of our clients who live in higher tax states are concerned that between changes in the federal income tax code as well as policies in their own state and their own state income taxes, the burdens of income tax are significant; and so they look at states that have low or no income taxes as being very favorable. Especially if they have high incomes or they’re thinking of selling a significant asset. And so taxes can play also an important role in why clients make that move.

Jonathan Michael: How about, is it customary for clients to update their estate planning documents when they move to a new jurisdiction?

Anita Sarafa: Absolutely. It’s always recommended that clients update their documents when they make a move. There can be differences not only in the tax aspects of the new state but also, you know, differences in state law. So, we always recommend that clients update their documents, sometimes before they make a move, but definitely once they’re in their new state.

Jonathan Michael: What are some of the issues that clients are considering when they update their estate planning documents? Why is it important?

Anita Sarafa: Well, there are a lot of reasons why clients will need to update their estate planning documents. There are often a lot of differences between the state that you’ve left and the state that you’re moving to that need to be addressed in your estate plan. And also, if you were moving from a high-tax state to a low-tax state, there’s even more reason why you want to update your documents. You want to create a new estate plan, new wills, Revocable Trusts, and Powers of Attorney in your state, and you want to literally sign those documents in your new state because showing your intent to make that new state your permanent home, your domicile, is very important. And the more facts that you have showing your intent to really make that your permanent home, the better, from an income tax standpoint.

Jonathan Michael: Okay. So we know there are 50 states, and all the states have different laws. And while we don’t have time today to get into all of the distinctions, maybe you could tell us about a few of the issues that you see from time to time, where there are differences in state law that clients really need to consider when they move from one jurisdiction to another?

Anita Sarafa: Absolutely. So, there are a lot of differences between the states in terms of how they treat different things that might impact your estate plan. You know, one of the things that comes immediately to mind is Power of Attorney. Those are usually statutory creatures, and so while hospitals and financial institutions in your new state would typically honor those Power of Attorney from your old state, it will delay things because often they have to review them, and they’re subject to a higher level of scrutiny. So, I usually tell clients to avoid that headache; to go ahead and sign a new Power of Attorney for health care and property once they move to a new state. Similarly, there can be differences in the way marital property is treated, so there are lots of reasons why clients should think about changing their estate plan and consulting with an attorney in their new jurisdiction.

Jonathan Michael: Well, Anita, you’ve informed us as to many, many issues that we have to consider if we move from one jurisdiction to another. Thank you for your time today. We appreciate it.

Anita Sarafa: Thank you.