If you include a revocable living trust as part of your estate and then decide to relocate to another state, your trust should remain valid. And although its validity won’t be affected, differing state laws regarding such matters as marital property may mean you’ll want to make some changes. If your move is buying a new home, it will be necessary to transfer this asset to the trust. We’ll provide a rundown on how it works.
Talk to a financial advisor about the advantages of trusts for estate planning.
Many estate plans use revocable living trusts to help shelter estate assets from probate. Estate plans also help shield private finances from public scrutiny and provide additional control over the disposition of assets after their owner’s death. Trusts can save money and reduce the length of time it takes to settle an estate. It can also ensure that dependents and favorite charities are supported, among other uses.
And while all 50 states take many different approaches to inheritance, they all treat trusts as valid legal contracts. This means you won’t have to draft new trust documents if you move to a new state. However, some differences in state laws on property and inheritance may make it advisable to review your trust documents. Here are some things to keep in mind:
While a trust drawn up in one state is valid in any other state, state laws vary considerably in other aspects. Some of these may indicate that a change to the trust provisions is in order if the trust’s original intent is to be protected.
Estate taxes represent one example. While the federal estate tax applies nationwide, six states levy their own additional estate taxes. If you’re moving to or from Iowa, Kentucky, Maryland, Nebraska, New Jersey or Pennsylvania, you may want to see how the potential imposition of a state estate tax would affect your estate plan. It could call for an adjustment to your trust, especially if you have a sizable estate.
If you purchase a new residence in your new home state, you’ll want to transfer it to the trust. If you don’t, your estate will have to go through probate. And that potentially adds costs and time to the process of settling your state.
For someone who is married, it may be relevant that states vary in the way they treat marital property. Specifically, most states are common law states that allow marital marital property to be owned separately.
A handful, however, is community property states And that’s where all property owned by marital partners is deemed equally shared. That’s even if the property is titled in one spouse’s name.
If you are married and relocating to a community property state from a common law state, it can affect your legal authority to bequeath property to anyone other than your spouse. Other considerations may apply if you’re moving from a common law state to a community property state to a common law state. In either case, it’s a good idea to review your trust to see that it will still work as intended.
While trusts aren’t likely to require revision after a relocation to a new state, other parts of your estate plan probably will need to be addressed. For example, any accounts with banks, brokerages or other financial institutions that are part of your plan should be notified of your new address. The same goes for insurance policies.
If beneficiaries such as children are moving with you, their addresses may also need to be updated. This could be necessary or advisable on trust documents, insurance policies, retirement accounts and others.
A trust drawn up in one state is valid in any state. But some differences between jurisdictions may make it advisable to review and possibly modify your trust. This is especially if you move to another state. Married people who move from a common law state to a community property state – or vice versa – may want to see the differences in how marital property is treated. And they will need to check and change the way their trust works, if applicable.
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Mark HenricksMark Henricks has reported on personal finance, investing, retirement, entrepreneurship and other topics for more than 30 years. His freelance byline has appeared on CNBC.com and in The Wall Street Journal, The New York Times, The Washington Post, Kiplinger’s Personal Finance and other leading publications. Mark has written books including, “Not Just A Living: The Complete Guide to Creating a Business That Gives You A Life.” His favorite reporting is the kind that helps ordinary people increase their personal wealth and life satisfaction. A graduate of the University of Texas journalism program, he lives in Austin, Texas. In his spare time he enjoys reading, volunteering, performing in an acoustic music duo, whitewater kayaking, wilderness backpacking and competing in triathlons.
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