Enjoying the warmth of southern climates during the winter and escaping the heat in the summer is the ideal retirement lifestyle for many. However, for estate planning purposes, you’ll need to pick one as your residence.
If you live in more than one state, an experienced estate planning attorney can help you determine which state will be best for you to claim residency for estate planning purposes, and what that state’s residency requirements are.
CBS Boston’s recent article, “Snow Birds: Protecting Your Estate While Living in Two States,” explains that it’s the laws of the state where you are legally a resident, which will determine your estate planning.
The federal exemption, the amount you can give away without incurring federal estate taxes, is $5,490,000. That can be a pretty high mark, so most individuals dying between now and December only have to worry about state estate taxes.
Ask an estate planning attorney about the estate tax laws of the state where you’re considering moving. There are 15 states that currently have an estate tax upon death, and six states that have an inheritance tax.
For example, Massachusetts is one of the 15. Its state exemption is now $1 million. That means if your estate is larger than $1 million, you could owe Massachusetts estate taxes. On the other hand, Florida, which is always seeking to attract more residents from the north, doesn’t have either an estate tax or an inheritance tax.
New Hampshire is the only state in New England without an estate tax.
It’s not uncommon for a person to own property and pay real estate taxes in both states, to have a bank account in both states and to purchase insurance in both states. Nevertheless, you can only live in one state. You’re just visiting the other state. Six months and one day determines where you live and where you vote.
If you own property in different states, it may mean that your heirs will need to go through the probate process upon your death in more than one state. Consider creating a trust and having the trust own the real estate to make the transfer of property less troublesome at your death.
It is advisable for those who live in more than one state to execute a Durable Power of Attorney in each state. If you unexpectedly need to have legal or financial decisions made by someone else, you’ll have that state’s proper documents in hand. This is especially important, if you have bank accounts and own property in each state. Prepare these documents now, and make sure that family members know where the documents are located.
Reference: CBS Boston (October 13, 2017) “Snow Birds: Protecting Your Estate While Living in Two States”