We hear daily inquiries about how to relocate all of your critical financial, home and medical information to a completely new city.
It has skyrocketed in Arizona. But, there are stringent laws to observe state-to-state.
Moving finance tips
1. Source reputable, credentialed professionals in your new state.
2. A qualified wealth planner assembles professional practice area teams to seamlessly relocate and integrate customized individual, family and business plans to observe appropriate new state laws.
Moving is a top stressor, sometimes we forget how significant a move might affect an entire estate plan — from income tax to inheritance tax. And, the elephant in 2021 — new tax codes or how about that Secure Act?
For instance, do you own one property or multiple properties? For many, Arizona is a haven for second or multiple residences or rentals.
Reporting factors can include where you spend your time, work, register to vote or drive, and the address in your legal documents. Executing a custom estate plan in your new state could be favorable to establishing a domicile.
It’s important to establish which state you domicile in for many tax-related reasons. As a former CPA and CFP, I know to navigate the impact.
Consider ramifications on your state income tax if you moved from a high-income tax state (California, New York) to a state that does not impose state tax. Also, those same high-income tax states may challenge your domicile, in an attempt to tax your income.
In your new state, a financial planner should review the titling of your assets, whether owned individually, jointly or by a trust with a spouse or non-spouse.
“Luxury real estate in Arizona has been selling at 50% increase over the same period last year. We don’t have enough inventory for the unparalleled demand. I scout homes every day to sell to the largest pool of luxury buyers that I’ve ever encountered in my business. We are one of the hottest housing markets in 2021,” states Co-Founder of Launch Real Estate, Beth Thompson.
Depending on your circumstances, it may be more beneficial to transfer title to the name of your trust or another convention permissible under your new state’s laws. Certain titling that may or may not be recognized across states, includes community property, tenants by the entirety and joint tenancy, all with or without right
of survivorship, which could impact the distribution of your property when you pass.
Some states have particular property laws that may impact or be impacted by your estate planning. Did you know that homestead laws may override your estate plan, as you will be required at your death to distribute your primary residence in the state to your spouse and/or children?
I know firsthand that it’s not just finances to worry about, but everything relating to the update of relocating your entire estate plan — medical, trust, will, revokable trust, powers of attorney for finances and medical, living will or advance directives. Most estate plans are drafted based on laws where you previously lived.
Major life changes happen. Expressly now with COVID-19 episodes. Birth, death, marriage, divorce. It’s wise to select and update appropriate beneficiaries and fiduciaries. It does not have to be complicated when selecting a highly qualified Arizona resourceful financial professional who brings it all under one unique and transparent family plan.
Consider your medical care. Health-care powers of attorney and other medical directives vary by state. Medical personnel are likely only familiar with their home state’s typical forms.
If you are unable to share your medical information or make informed decisions, your agent’s authority may be delayed by an out-of-state document.
Legal counsel may need to confirm your documents’ validity and your agent’s authority, impeding decisions that could relate to your life-sustaining or end-of-life care.
With your initial estate plan, one difficult decision is nominating which individuals you trust to act on your behalf for medical, financial and estate matters. Consider whether you named your local friend and then, moved.
Geographically, important decisions during life and upon death may become logistically inconvenient, or unnecessarily complicated.
While federal estate tax only applies to decedents with estates above $11.58 million (as of 2020), state estate, inheritance and gift taxes may be imposed on decedents with a significantly lower net worth.
“There probably are some ways for you to decrease your tax costs. A financial advisor may be able to reduce your tax costs with minimal effort and cost.
Also with a financial advisor you can get answers for your financial questions with a brief phone call,” states Bernie Barry, managing partner of Barry & Moore, CPAs.
Most states do not impose estate taxes on transfers to a surviving spouse and may be reduced based on your relationship to the beneficiary. Regardless of whether you move into or out of a state that imposes an estate or inheritance tax, your estate plan may need to be restructured or simplified to reflect the estate tax of your new home.
If you are the trustee or beneficiary of an irrevocable trust, discuss the impact of your new home state with your attorney. Each state determines the taxation, if any.
If you are leaving California, this is likely favorable because of the increased tax rates there. However, suppose you are a trustee of an irrevocable trust and move to California. In that case, even if there are no assets or beneficiaries in California, your move will likely subject the trust to California’s taxes unless you resign.
When selecting a new financial manger consider their legal team or resources, specifically in estate planning, the percentage of their practice in estate planning and whether they have multiple clients in your same financial or family situation.
Some states do not permit non-resident executors.
Only three states allow a non-resident executor — if they are related to you.
Other states impose other requirements, such as appointing an in-state agent or posting a bond to protect your estate.
Scottsdale Wealth Planning, Inc. (“SWP”) is a registered investment adviser.
The information provided is for educational and informational purposes only and does not constitute investment advice and it should not be relied on as such.
Editor’s Note: Paul Ohanian is founder of Scottsdale Wealth Planning.