Don’t Let Moving Wreck Your Will
Your new state’s laws can lead to estate taxes and hassles for heirs
Are you moving to a new state to pursue a job offer or retire where the weather is better? Be warned that your new state’s laws may mess up your estate plan.
To avoid problems, ask the lawyer who drew up your will to recommend an attorney in your new home state who can redo the will and other legal documents. Or, get referrals from the American College of Trust and Estate Counsel.
Here are six considerations to keep in mind.
Related: 3 Big Moving Scams to Avoid
State estate and inheritance taxes
Even if your old state didn’t tax your estate, your new state might. (That’s in addition to federal estate taxes you’ll pay if your estate exceeds the exemption limit, which most people’s estates don’t. Married couples can leave or give away $10.86 million free of federal taxes.) New Jersey, for instance, taxes estates worth more than $675,000.
Thirteen states and the District of Columbia collect only estate taxes, not inheritance taxes, which are paid by your heirs. Those states are:
- New York
- Rhode Island
- Tennessee (the tax goes away in 2016)
Four states impose only inheritance taxes. They are:
Only Maryland and New Jersey collect both estate and inheritance taxes.
State laws vary, but tax rates and exemptions depend on how closely you're related to your heir.
State gift taxes
Only Connecticut levies a state gift tax. If you’re planning to settle there and make generous gifts, you might want to do it before you move.
(You can give away as much as $14,000 a year each to as many people as you choose without triggering the federal gift tax. The amount rises to $28,000 if you and your spouse each give.)
Snowbirds beware: Owning homes in more than one state could lead to an estate tax bill from the state you thought you left, or worse, from multiple states.
That’s why you should clearly establish a single domicile — legalese for the state in which you make your principal home. Close bank and brokerage accounts in your old state and open new ones in your new state. Get a driver’s license, register to vote and file income tax returns in your new state.
Be sure your estate plan conforms to your new state’s laws regarding who can inherit certain property. Most states use the common-law system of property ownership. That means an asset belongs to the spouse whose name is on its titling documents.
If both you and your spouse have your names on a titling document, your right to bequeath your interest in the asset in your will depends on how you share ownership. If you own the item as “joint tenants with rights of survivorship,” for example, it automatically passes to your surviving spouse when you die. If you own the asset as “tenants in common,” you may leave your interest in it to someone other than your spouse.
The rules are different if you live in one of the nine community-property states: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin. (In Alaska, married couples can legally agree to make specific assets community property.)
These states regard spouses as equal owners of all property they acquire while living within the state except gifts and inheritances. If you want to make sure your share of community property goes to your spouse after your death, say so in your will.
Some states make it tough for you to have an executor who doesn’t live in your new state. A few require that an out-of-state executor be a relative or primary beneficiary of your will. For example, Florida prohibits naming a nonresident as your executor (there it’s called a “personal representative”) unless he or she is a relative by blood, marriage or adoption.
Health care directives
Laws concerning living wills and durable health care powers of attorney vary by state, so start fresh when you move to a new one.
In some states, health care directives consist of two parts. The first, a living will, lists medical interventions you do or don’t want under certain circumstances. The second part is a durable health care power of attorney, in which you name a health care proxy who will make sure medical personnel carry out your wishes if your doctor declares you incapacitated.