Should you Update your Estate Plan if you Move to a New State?

Moving to a new state might mean estate plan changes for legal reasons, but more likely because of your change in circumstances.

I recently had a discussion with a client regarding whether and how they should update their estate plan if they move to a new state.  That conversation comes up frequently, so I thought it would be a great topic for a blog article.

The U.S. Constitution requires states to give “full faith and credit” to the laws of other states. As a result, your will, trust, power of attorney, and health care proxy executed in one state should be honored in every other state.  However, even if they are “valid” in another state doesn’t mean they will work well under that state’s laws or that they will work as well in practice, as described in Wealth Advisor’s recent article entitled “Moving to a New State? Be Sure to Update Your Estate Plan.”

Your last will should still be legally valid in the new state. However, the new state may have different probate laws that make certain provisions of the will invalid or no longer ideal.  By way of example, Texas has a unique form of probate in which there is an independent executor.  This minimizes court involvement in the probate which is what most clients prefer.  We often revise wills of clients moving to Texas to authorize independent executors.  Similarly, other states might have other unique provisions that you would want to utilize in that state.

This can also happen with revocable trusts, however trusts tend to be more portable.  Once a trust is funded, you can change any provisions you need to ensure it works in that state and you can elect that state’s laws.  So, it might need to be updated, but often is more portability.

You may also want to update your estate plan if you move to a new state to change your powers of attorney and health care directives. These estate planning documents should be honored from state to state, but sometimes banks, medical professionals, and financial and health care institutions will refuse to accept the documents and forms.  Each state has very specific roles on how these are created and what they can accomplish, so it is typically advisable to create new ancillary documents based upon the law of the new state.

It is also helpful to keep in mind that it is practically important to redo ancillaries documents because lawyers and judges aren’t the ones reviewing them.  Court systems will know how a will or trust applies under that state’s law because lawyers are involved in the process.  Incapacity documents such as the power of attorney and health care directives are reviewed by non-legal professionals such as title companies, doctors, bankers or their support staffs.  So practically speaking, it is easier to give them what they expect to see as they won’t have the expertise to recognize whether an out of state document is valid.

You should also know that the execution requirements of your estate planning documents may be different, depending on the state.

For example, there are some states that require witnesses on durable powers of attorney, and others that do not. A state that requires witnesses may not allow a power of attorney without witnesses to be used to convey real estate, even though the document is perfectly valid in the state where it was drafted and signed.

When you move to a different state, it’s also a smart move to consult with an experienced estate planning attorney because interstate moves often mean another change in circumstances that would necessitate a change to the estate plan.  For example, the move might have been because of a change in income, marital state or to support a family member in ill health.  You can see here for other reasons to consider updating your estate plan at that point.  https://galligan-law.com/when-to-update-your-estate-plan/

Moreover, there may be practical changes you want to make. For example, you may want to change your trustee or agent under a power of attorney based on which family members will be closer in proximity or to someone familiar with the new property.  This is also a good time to review trust funding as you will have new assets.

For all these reasons, when you move out of state it’s wise to have an experienced estate planning attorney in your new home state review your estate planning documents.

Reference: Wealth Advisor (Jan. 26, 2021) “Moving to a New State? Be Sure to Update Your Estate Plan”

Continue ReadingShould you Update your Estate Plan if you Move to a New State?

What Estate Planning Mistakes Do People Make?

Clients often make these estate planning mistakes which jeopardize family harmony and expose families to anxiety, delay and unnecessary cost.

Estate planning for any sized estate is an important responsibility to loved ones. Done correctly, it can help families flourish over generations, control how legacies are distributed and convey values from parents to children to grandchildren. However, a failed estate plan, says a recent article from Suffolk News-Herald titled “Estate planning mistakes to avoid,” can create bitter divisions between family members, become an expensive burden and even add unnecessary stress to a time of intense grief.

Here are some estate planning mistakes to avoid:

This is not the time for do-it-yourself estate planning.

An unexpected example comes from the late Chief Justice of the Supreme Court Warren Burger.  He wrote a 176 word will, which cost his heirs more than $450,000 in estate taxes and fees. A properly prepared estate plan could have saved the family a huge amount of money, time and anxiety.  This example also points out that even brilliant legal minds make mistakes if they aren’t experts in this area!

Don’t neglect to update your will or trust.

Life happens and relationships change. When a new person enters your life, whether by birth, adoption, marriage or other event, your estate planning wishes may change. The same goes for people departing your life. Death and divorce should always trigger an estate plan review.  Clients often confront this estate planning mistake at this time of year as part of new years resolutions or as part of a financial check-up with their financial advisors, so now is an excellent time to consider it.

Don’t be coy with heirs about your estate plan.

Heirs don’t need to know down to the penny what you intend to leave them but be wise enough to convey your purpose and intentions, at least to the individuals in charge of the plan. If you are leaving more uneven amounts to children for example, it may be a kindness to explain why to your love ones.  Otherwise, they will be forced to come up with their own answers, which may lead to fighting. If you want your family to remain a family, share your thinking and your goals.

If there are certain possessions you know your family members value, making a list those items and who should get what. This will avoid family squabbles during a difficult time. Often it is not the money, but the sentimental items that cause family fights after a parent dies.  Some of the worst estate disputes I’ve ever dealt with were over sentimental items.

Clients often ask about this topic, so see this article if you are interested in more information.  https://galligan-law.com/how-to-avoid-family-fighting-in-my-estate/  

Understand what happens if you are not married to your partner.

Unmarried partners do not receive many of the estate tax breaks or other benefits of the law enjoyed by married couples. Unless you have an estate plan in place, your partner will not be protected. Owning property jointly is just one part of an estate plan. Sit down with an experienced estate planning attorney to protect each other. The same applies to planning for incapacity. You will want to have appropriate incapacity planning documents such as financial and medical Powers of Attorney so that you may speak with each other’s financial institutions and medical providers.

Don’t neglect to fund a trust once it is created.

It’s easy to create a trust and it’s equally easy to forget to fund the trust. That means retitling assets that have been placed in the trust or adding enough assets to a trust, so it may function as designed. Failing to retitle assets has left many people with estate plans that did not work.  Happily this is a very easy estate planning mistake to correct, though you should consult an attorney on how to properly utilize your trust.

Don’t be naive about people you put in charge of your estate plan.

It is not pleasant to consider that people in your life may not be interested in your well-being, but in your finances or other self-serving motivations. However, we see this all the time. This concern must be confronted honestly, even when it is children, during the estate planning process. Elder financial abuse and scams are extremely common. Family members and seemingly devoted caregivers have often been found to have ulterior motives. Be smart enough to recognize when this occurs in your life.

Reference: Suffolk News-Herald (Dec. 15, 2020) “Estate planning mistakes to avoid”

Continue ReadingWhat Estate Planning Mistakes Do People Make?

New Digital Asset Law Passes in Pennsylvania

The new PA digital asset law highlights the need to plan for your loved ones to have access to your digital assets after you pass.

More and more of our lives are lived online. We bank online, use email for everything, have Facebook, Twitter, Instagram accounts, keep photos on the cloud and have usernames and passwords for virtually every part of our online presence.  All of these things could be considered digital asset examples. However, what happens when we become disabled or die and our executor or a fiduciary needs to access these digital assets? Pennsylvania recently joined many states that have passed a law intended to make accessing these accounts easier, reports the Pittsburgh Post-Gazette in the article “New Pa. law recognizes digital assets in estates.”

The official name of the law is the Revised Uniform Fiduciary Access to Digital Assets Act, or RUFADAA. Pennsylvania is one of the last states in the nation—48th—to adopt this type of legislation, with the passage of Act 72 of 2020 (FYI Texas readers, the Texas legislature passed the Texas Revised Uniform Fiduciary Access to Digital Assets Act (TRUFADAA) in 2017). Until now, Pennsylvania didn’t allow concrete authority to access digital information to fiduciaries. The problem: the ability to access the information is still subject to the agreement that the user has with the online provider. That’s the “yes” we give automatically when presented with a software terms of service agreement.

Online service providers give deference to “legacy” contacts that a user can name if authority to a third party to access their accounts is given. However, most people don’t name a successor to have access or the successor is unaware of it, and most apps don’t have a way to do this.  I just this week received my first prompt from Facebook to name a legacy successor contact, and if Facebook is just starting that process, you can assume most other apps are far behind.

These laws are necessary because administering an estate with digital assets presents unique challenges.  With digital assets, first you have to locate the person’s digital assets (and chances are good you’ll miss a few). There’s no shoebox of old receipts, or letters and bills coming in the mail to identify digital property. The custodians of the online information (Facebook, Instagram, TikTok, Google, etc.) still rely on those contracts between the user and the digital platform.

Under the digital asset law, if the user does not make use of the online tool to name a successor, or if one is not offered, then the user can dictate the terms of access or non-access to the online accounts through estate planning documents, including a will, trust or power of attorney.  Most quality estate planning attorneys have included access to such assets in the documents they prepare, and we certainly do.

Here are some tips to help administer your digital assets:

Make a list of all your online accounts, their URL address, usernames and passwords. Share the list only with someone you trust. You will be surprised at just how many you have.  I did this a few years ago and was surprised to find it covered four pages.  You should also consider recording login information to your devices where you might store information.  Often people don’t keep paper records, so you can look for information on laptops, phones and similar devices.  Our estate planning binders actually provide a section to do exactly this.

Review the terms of service for each account to see if you have the ability to provide a name for a person who is authorized to access the account on your behalf, such as the Facebook example I provided.

Make sure your estate planning documents are aligned with your service contract preferences. Does your Power of Attorney mention access to your digital accounts? Depending on the potential value, sentimental and otherwise, of your digital assets, you may need to revise your estate plan.  This is especially true as our lives are likely to become even more digital in the future.

If you are interested in learning more on this topic, especially the practical components, Mary Galligan did an excellent article on this topic you can find here.  https://galligan-law.com/does-your-estate-planning-include-your-online-account-passwords/

Remember to never put specific private information in your estate plan such as account numbers, URLs, usernames or passwords, since your will becomes a public document once it is probated and your other documents may be shared as well. Your estate planning attorney will know how to best accomplish documenting your digital assets, while enabling access to them for your fiduciaries.

Reference: Pittsburgh Post-Gazette (Aug. 24, 2020) “New Pa. law recognizes digital assets in estates.”

Continue ReadingNew Digital Asset Law Passes in Pennsylvania