Estate Planning Considerations for Out-of-State Retirees

Many people who live in Northern states head to Florida for the winter to escape the cold, rain, and snow. If you are from out of state or a Florida resident, you must consider several estate planning variables.

Establishing Residency

The first consideration is choosing the best state to establish residency while considering the related tax implications of that choice. For example, New York residents must pay the state income tax on earned and unearned income (e.g., interest, dividends). If you are a non-resident or part-year resident, you are subject to tax only on your New York source income.

By contrast, Florida does not have a state income tax. Residents do not pay a state income tax to Florida. Additionally, Florida does not have an estate tax - which is a tax on your non-exempt assets after you pass away. However, New York has an estate tax ranging from 5 to 16 percent for estates above the exemption amount, which is adjusted annually.

Consider Your Will

If you created a legally valid will in your home state, it should also be valid under Florida law. There are some differences between state laws which could make matters complicated. Notably, Florida does not permit the use of an ad terrorem clause, which states that anyone who challenges the terms or provisions of a will forfeits their right to any estate assets. Such a clause is permissible in states like New York.

Also, in some states, the individual appointed to administer the decedent’s estate is an “executor.” In Florida, that individual is called a “personal representative”. Florida law generally requires a personal representative to be a resident with some exceptions for the following relatives of the decedent:

• A son or daughter related by blood or adoption
• A biological or adoptive parent
• A spouse
• A sibling
• An aunt or uncle
• A spouse or direct descendant of any of the above people

As a result, if a business associate or a friend is named as the executor in a New York will, these individuals may not be able to administer your estate in Florida.

Understanding Probate

It is common to own property in more than one state. Suppose you own a single-family home in New York as your primary residence and a condo in Florida. If you are a New York resident, your estate will be probated in that state after you die. There will also be an “ancillary probate” in Florida to address assets you own there, such as your vacation home.

One way to avoid probate is to transfer assets into a revocable living trust. This estate planning tool takes ownership of property but allows the “settlor”, or the originator of the trust, to continue managing it during one’s lifetime. Creating a revocable trust is a wise choice for out of state retirees who spend time in Florida or anyone who owns property in multiple states. A skilled estate planning attorney can determine how to best protect assets by designing a properly structured trust.

Financial Power of Attorney

A financial power of attorney designates a trusted person to manage financial affairs for someone should they become incapacitated due to an illness or injury. This estate planning document is essential for anyone, especially retirees. If you divide your time between Florida and your home state and own property or have financial assets in both locations, it is crucial to have powers of attorney in both states.

Advance Medical Directives

Out of state retirees who divide their time between two states should consult an attorney to determine what each state requires regarding advance healthcare directives. This essential legal document allows you to appoint someone to make medical decisions on your behalf when you cannot speak for yourself.

In New York, for example, that document is referred to as a healthcare proxy, and the person you appoint is your healthcare agent. In Florida, that document is called a Declaration of Healthcare Surrogate, and the person is your surrogate. Although a New York healthcare proxy may be acceptable in Florida, the differences between these documents may be confusing in an emergency. It is wise to create these documents for both states.

Other Estate Planning Considerations for Snowbirds

Adequate life insurance coverage is another essential. Make sure your life insurance policy will meet your family’s needs if you die suddenly. Also, many retirees should consider a long-term care policy to cover their healthcare needs should they require rehabilitative or skilled nursing care.

It is also crucial to ensure that the beneficiary designations on your insurance policy, as well as your retirement plans and other estate planning documents, are up-to-date and aligned with life’s transitions, such as marriage, divorce, births, deaths, or adoption.

The Takeaway

The traveling retiree lifestyle involves estate planning considerations that require the advice and guidance of an experienced attorney. Having proper legal representation will allow you to rest easy while you enjoy your time exploring and relaxing in two states.