Estate Planning in Different States

Estate planning in different states addresses key nuances between the states’ laws for people who move or spend much time in other states.

In this very mobile society, clients often move from state to state.  Whether the move is due to job opportunities, to be close (or far) from family or just for a change of scenery, many people will live in multiple states in their lifetime.  They often don’t realize that estate planning laws vary greatly from state to state and understanding the difference could have a significant impact on whether your estate plan is effective.  It is best to get this straight shortly after moving, says The National Law Review in the recent article “Updating Your Estate Plan: What Michigan Residents Need to Know When Moving to Florida.”

It’s not just people from Michigan who move to Florida who need to have their estate plans reviewed, if they are snowbirds or making a full-time move—it’s anyone who moves to another state, from any state. However, Florida’s popularity makes it a good example to use.

Florida restricts who is permitted to serve as a Personal Representatives under a will. The personal representative, also known as an executor, must be a descendant or ancestor of the decedent, a spouse, brother, sister, aunt, uncle, nephew, niece or descendant or ancestor of any such person or a Florida resident.

Florida doesn’t recognize “no contest” clauses in trusts or wills. It also does not recognize unwitnessed testamentary documents, which are handwritten documents even if they are in your own handwriting. By way of example, Texas does and have had to utilize that option during the COVID-19 lockdowns.

Florida also has a special set of laws, known as the Homestead laws, designed to protect a decedent’s surviving spouse and children. You may have had other plans for your Florida home, but they may not be passed to the people you have designated in your non-Florida will, if they don’t follow the Sunshine State’s guidelines.

Power of Attorney laws differ from state to state, and this can create huge headaches for families. In many states, powers of attorney can be “springing,” meaning they become effective upon disability. In Florida, once a Durable Power of Attorney is signed, it is effective. Florida may accept a power of attorney from another state, but Florida law will be applied to the agent’s actions, and restrictions will be based on Florida law, not that of another state.

Estate planning in different states is very unique when it comes to estate planning documents concerning medical and financial decisions while you are living, these are also different. I routinely tell people that if you relocate, you have to change these documents.  A living will names a person, known as a “Patient Advocate” in Michigan or a “Health Care Surrogate” in Florida, who is authorized to make decisions regarding end of life care, including providing, withholding, or withdrawing life-sustaining treatment. In Michigan, you need two doctors to certify a patient’s incapacity for non-life-or-death decisions. In Florida, only one doctor is needed.  Even simpler, these documents will not be reviewed by attorneys.  They will be reviewed by medical professionals rendering care to you.  So, it is best to give them the format they anticipate so there is not delay in providing care to you.

On a broader prospective, estate administrations are very different in different estates, and that leads to different goals in estate planning.  I’m admitted in Pennsylvania, New York and Texas.  In Pennsylvania, we frequently used wills as the primary estate plan vehicle because the probate process is easy to initiate, and all of the work of an estate administration exists whether or not you are using a trust.  In New York, we almost exclusively used trusts.  Probate was far more involved and expensive, which made living trusts extremely helpful to clients. In Texas, we definitely draft more trusts as they are still beneficial, but it isn’t nearly as critical as it is in New York.   To make it one step worse, Pennsylvania has inheritance taxes, New York has estate taxes, and Texas has neither.  Those are three very different estate planning realities.

As a final point, if you expect to relocate in the future and are considering estate planning, I strongly recommend a living trusts.  Trusts tend to be portable as they go outside of the court probate process, which is where many of the state nuances lie.  This is also helpful because clients who move often have real estate in multiple states.  Real property in multiple states potential means multiple probates, which people don’t expect.

So, if you are planning on a move or even if you just spend substantial time outside of your home state, meet with your estate planning attorney to understand how any and all of your estate planning documents will work—or not—when you are in another state.

Reference: The National Law Review (June 30, 2021) “Updating Your Estate Plan: What Michigan Residents Need to Know When Moving to Florida”

Continue ReadingEstate Planning in Different States

Preparing for an Estate Planning Meeting

Preparing for an estate planning meeting involves considering who you want to benefit, what you own and who is in charge of the processes.

Long ago when I first started doing Kevin’s Korners on Facebook and YouTube, I asked viewers for ideas on topics.  I expected to hear suggestions on how to administer estates, what is probate or complicated tax questions.  Instead, the first response, which was repeated by others, was what is the first step in making an estate plan.  What is the process to begin.  To put it another way, what to consider when preparing for an estate planning meeting.

So, for this blog I wanted to cover some topics and thoughts on preparing for the first meeting with an estate planning attorney.  Preparing to meet with an estate planning attorney for the first time is an opportunity to get organized and think about your wishes for the future. If you meet with your accountant every year to prepare tax returns, this may be a familiar process. It’s a chance to step away from day-to-day activities and focus on your life, as described in a recent article “Preparing for an Estate Planning Consultation: 10 Items to Consider Before Meeting Your Attorney” from The National Law Journal.  So with that, here are some issues to consider when preparing for an estate planning meeting.  This is by no means an exhaustive list, but should get you started in the right direction.  You can see here for the Kevin’s Korner video as well.  https://www.youtube.com/watch?v=B2M_-tBoSiU 

Minor Children Need Guardians. In most states, families with minor children need to designate one or more guardians to raise the children in the event both parents die. A successor should be named in case the first named guardian is unable or unwilling to serve. Discuss your decision with the people you are naming; don’t leave this as a surprise. Choosing these people is a hard decision. However, don’t let it be a reason to delay creating your estate plan. You do not want your family, or a Court, to guess what your wishes are in this regard.

Agents, Trustees, and Executors (Fiduciaries). A key component of an estate plan is who is in charge of the process, who executes your wishes or speaks for you if you can’t.  These roles, generally called your fiduciaries, are different depending on what task they need to accomplish and which legal document gives them that authority. With a Durable Power of Attorney, your assets can be managed by a named agent, if you become incapacitated. The person who manages your estate after death is the executor. They are named in your will. If you have trusts, the documents that create the trust also name the trustees. It is possible for one person to act as a fiduciary for all of these roles, although the tasks can be divided.  You also always want to consider back-ups should your first choices not be available.

Living Will and Medical Decision-Making. If you are unable to communicate your own medical wishes, an agent can make medical decisions on your behalf, including following the instructions of your Living Will.

Significant Property. Any items of significant property, whether their value is sentimental or monetary, should be considered specifically. This is helpful to avoid  squabbles over sentimental pieces of property, large or small.  Valuable or important property such as the home or business should be considered specifically to avoid delay, costs or other hazards that might affect their value or operation.

Beneficiaries.  This is probably the most obvious issue, but you should consider who will receive your property and in what manner.  For example, you might consider whether to leave your property outright to a beneficiary or put it in a trust to obtain various benefits.  You should consider if you want to take care of as much of your estate plan now as possible to make it easier for your loved ones later.  This is the decision of whether to utilize a will or a trust.  See here for a helpful guide.   https://www.galliganmanning.com/will-vs-living-trust-a-quick-and-simple-reference-guide/  You also should be familiar with the titling of your assets (your name, your and your kids’ names and so on) as well as which assets have beneficiary designations (life insurance and retirement funds are common examples) so that the assets coordinate with your plan.

You should also consider if there are any particular issues with your beneficiaries to be addressed.  For example, minor children may not receive assets until they become of age—18 in most cases- but that is hardly a prudent age to leave someone a windfall.  You can consider the use of a trust to delay the receipt of the property to a more reasonable age.  Similarly, you might want to create asset protection or divorce protection for your beneficiaries and can utilize trusts to help you accomplish that goal.  If you have a loved one with disabilities, you should consider what their needs are and are likely to be in the future.  What kind of resources do they need if you aren’t able to provide for them and where do they get that support.   As a final thought, if you are charitably minded, your estate plan is a great way to make charitable gifts and build a lasting legacy. Charitable donations can also be made to gain tax benefits for heirs.

Surviving Pets. You can plan for your pet’s care, if you pass away or become incapacitated before they die. Most states permit the creation of a pet trust, an enforceable means of providing assets to be used for the care and well-being of your pet.

Once you’ve considered the above in preparing for an estate planning meeting, you’ll have an idea of what your estate planning goals are.  That way, your meeting with a competent estate planning attorney will focus on how to accomplish those goals and you can discuss which documents are necessary to do so.

Reference: The National Law Journal (Feb. 23, 2021) “Preparing for an Estate Planning Consultation: 10 Items to Consider Before Meeting Your Attorney”

Continue ReadingPreparing for an Estate Planning Meeting

When to Update your Estate Plan?

Waiting too long to update an estate plan may lead to bad plans and hurt families. Here are some milestones when you should consider changes.

Many people say that they’ve been meaning to update their estate plan for years but never got around to doing it.   Our office is located near the hospital system, so we get a lot of calls for last minute changes, which is difficult, and sometimes not possible.  Worst of all, we occasionally have to probate out of date wills or administer old trusts that left complicated, unnecessary tax planning, unsuitable executors or trustees, or in some cases, beneficiaries the client meant to change, but never did.

As a way to avoid those scenarios, this blog will talk about when you need to review your estate plan.  This isn’t exhaustive and the best approach is to review the plan every few years, but these major life events often indicate a need to change your plan.  The list as follows comes from Kiplinger’s article entitled “12 Different Times When You Should Update Your Will” and gives us a dozen times you should think about changing your estate plan, as well as a few more of my own:

  1. You’re expecting your first child. The birth or adoption of a first child is typically when many people draft their first estate plan. In Texas the designation of a guardian for the child happens outside a will, but it is still important to provide a trust and trustee for that child in your estate plan as well.
  2. You may divorce. Update your estate plan before you file for divorce, because once you file for divorce, your estate plan and assets may not be able to change until the divorce is finalized. Doing this before you file for divorce ensures that your spouse won’t get all of your money if you die before the divorce is final.
  3. You just divorced. After your divorce, your ex no longer has any rights to your estate (unless it’s part of the terms of the divorce). However, even if you don’t change your estate plan, most states have laws that invalidate any distributive provisions to your ex-spouse in that old will. Nonetheless, update your estate plan as soon as you can, so your new beneficiaries are clearly identified and that any obligations created in the divorce are fulfilled.
  4. Your child gets married. Your current estate plan may speak to issues that applied when your child was a minor, so it may not address your child’s possible divorce. You may be able to ease the lack of a prenuptial agreement by creating a trust for your child in your estate plan to keep those assets out of the marriage.
  5. A beneficiary has issues. Estate plans frequently leave money directly to a beneficiary. However, if that person has an addiction or credit issues, update your estate plan to include a trust that allows a trustee to only distribute funds under specific circumstances.  It is often a good idea to create such a trust anyway in case issues arise in the future.
  6. Your executor or a beneficiary die or are incapacitated. If your estate plan named individuals to manage your estate or receive any remaining funds, but they’re no longer alive or suffering bad health, you should update your entire estate plan (especially powers of attorney).
  7. Your child turns 18. Your current estate plan may designate your spouse or a parent as your executor, trustee or other fiduciary, but years later, these people may be gone or not suitable. Consider naming a younger family member to handle your estate affairs.
  8. A new tax or probate law is enacted. Congress may pass a bill that wrecks your estate plan. Review your plan with an experienced estate planning attorney every few years to see if there have been any new laws relevant to your estate planning.  It is also a good idea to keep reading blogs like this one as we try to address significant changes that might affect you.
  9. You receive a financial windfall or loss. If you finally get a big lottery win or inherit money from a distant relative, update your estate plan so you can address the right tax planning. You also may want to change when and the amount of money you leave to certain individuals or charities.  Similarly, a significant financial loss may mean you can jettison unnecessary tax planning and can simplify your plan.  I find many people change their minds on beneficiaries if they think they will leave less money as well.
  10. You can’t find your original estate plan. This happens more than people realize.  If you cannot find your original Will or other estate planning documents, you should consider executing a new one.  First, if you can’t find it that typically indicates it’s so old it needs updating anyway, but in the case of wills you should probate the original.  It is sometimes possible to probate a copy, but that isn’t a given and you should avoid that scenario.
  11. You purchase property in another country or move overseas. Some countries have treaties with the U.S. that permit reciprocity of wills, but how well that works is another matter.  Transferring property in one country may be delayed, if the will must be probated in the other country first. Ask your estate planning attorney about how to address property in multiple counties.
  12. You relocate to a new state.  Estate plans don’t always need to change when you relocate, but there are nuances to each state’s estate and tax laws, so you should consult with a local attorney after you move.  For example, Texas is a community property state that changes how property is owned going forward for married couples and has no estate tax.  A new resident coming from a common law property state with a state estate tax like New York might benefit from a new plan.
  13. Your feelings change for someone in your estate plan. If there’s animosity between people named in your estate plan, you may want to disinherit someone or change your estate plan. You might ask your estate planning attorney about a No Contest Clause that will disinherit the aggressive family member, if he or she attempts to question your intentions in the estate plan.
  14. You get married (or remarried).  One milestone I like to point out that a surprising number of people don’t consider, is updating your estate plan after you get married or in the event you remarry.  Many people assume that their spouse becomes an automatic beneficiary of their estate plan, which isn’t true, although all states give some rights to the new spouse.  It is far better, especially in a second marriage where step children are involved, to update your estate plan to exactly what you want for you and your loved ones.
  15. Your own bad health.  One milestone I’m particularly sensitive to is your own bad health, especially cognitive health such as dementia or Alzheimer’s.  Many clients prepare plans when they are young that aren’t considering long term care, Medicaid or other planning, so that should be complete before incapacity prevents it.

Reference: Kiplinger (May 26, 2020) “12 Different Times When You Should Update Your Will”

Continue ReadingWhen to Update your Estate Plan?