• Ronald A. Flate

Review your estate plan when you move across state lines

Dear Clients and Friends,

Trust and estate laws are different from state to state. If you are moving to California from another state, be sure to review your estate plan with us. If you are leaving California and moving elsewhere, consult an estate planning attorney in your new home state. 

Usually, the probate court will recognize a will from another state. But in the case of a dispute, you can’t be sure the judge in the new state will understand your will the way that you meant it.

Your new place of residence might place restrictions on executors from out of state. It’s also possible that your new medical provider or bank won’t adhere to powers of attorney drafted under another state’s laws.

One big issue is whether you’re moving from a common-law property state — which is the case in most states — to a community property state, or vice versa. In a common-law state each spouse’s separate property obtained during marriage remains separate, while in a community property state assets acquired during a marriage are jointly held by both spouses. When you move between states with different governing principles on this issue, it can become unclear who owns what property at death, and estate tax consequences might arise.

Income tax rules also differ from state to state. Some don’t have an income tax, while others have significant income tax rates which will have an impact on your estate plan. In some states the law might allow a lower exclusion than the federal estate tax. If you don’t pay attention, you could have your estate taxed by your new state even if your estate is under the federal exclusion amount.

If someone dies in California with less than the exemption amount, their estate doesn’t owe any federal estate tax, and there is no California inheritance tax. The heirs and beneficiaries inherit the property free of tax. They don’t pay income tax on it either, because inherited property is not ordinary income.

As a former IRS Attorney, I was specially assigned to the estate and gift tax division, and we continue to provide a free phone evaluation on all of your estate planning or probate inquiries.

Looking forward to hearing from you or yours.

Best,

Ron

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