Considerations Before You Head South for the Winter
For many snowbirds, cooler weather means it is time to head south. If you are thinking about heading for warmer weather this winter, there are a few things you should consider before hitting the road.
Which State Do You Consider Your Home? Residency vs. Domicile for Snowbirds
If you split your time between two states, it is important to understand the distinction between residency and domicile. These concepts can affect your estate plan, state income taxes, property rights, and eligibility for certain state benefits and exemptions. They may also affect which state has jurisdiction over a divorce, although child custody jurisdiction is generally determined under separate “home state” rules.
You may qualify as a resident of more than one state because each state applies its own residency rules. However, you can generally have only one domicile at a time. Your domicile is the state you consider your permanent or indefinite home and the place you intend to return to when you are away. Determining domicile depends not only on what you say your intentions are but also on your actions and connections to each state.
Splitting your time between states can affect more than your lifestyle—it may also affect your income taxes, estate or inheritance taxes, property-tax benefits, and estate plan. Talk with your tax advisor to confirm that you are filing the appropriate returns in each state and taking advantage of any available tax-planning opportunities.
State tax rules vary widely. Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming do not impose a broad-based individual income tax. However, some of these states tax particular types of income.
Owning property in more than one state can add another layer of complexity, particularly if one state follows community property rules and the other follows common law property rules. In a community property state, most property acquired by either spouse during the marriage is generally treated as jointly owned, subject to important exceptions. In a common law property state, ownership is generally determined by title and other state property laws, although a spouse may still have marital, homestead, elective share, or other rights in the property.
We encourage you to meet with us to ensure that your estate plan accounts for the laws of each state in which you live or own property.
Have You Reviewed Your Estate Plan Lately?
Life changes, sometimes without much warning. Before you head out for the season, take time to pull out your estate planning documents and ensure that they still reflect your wishes, both during your lifetime and after your death.
Ask yourself the following questions:
- Are your chosen decision-makers still the right ones? These individuals may include your trustee, personal representative or executor, guardian for a minor child, and the agents named in your financial or medical powers of attorney. Are they still willing and able to serve?
- Are your beneficiaries up to date? Confirm that everyone you have named is still living. Is there anyone new—family, friends, or charities—that you would like to include? Would you like to change how much someone receives or how they receive it?
- Do your beneficiary designations match your overall plan? Retirement accounts and life insurance policies pass directly to whoever is named on the account, regardless of what your will or trust says. Make sure that these designations line up with the rest of your estate plan.
- Can your agent move you to another state if needed? If a health issue leaves you unable to make decisions for yourself, does your named agent have the authority to relocate you—for example, to be closer to family?
If you may need help managing finances or completing transactions while you are away, check when your financial power of attorney becomes effective. Depending on the document and the law of the state in which it was created, it may be immediate or springing.
- An immediate power of attorney generally becomes effective as soon as it is properly executed. Your agent can act on your behalf even while you remain fully capable of managing your own affairs. This setup can be helpful if you want assistance while traveling. You do not give up your own authority simply because your agent is also authorized to act.
- A springing power of attorney becomes effective only after a specified event occurs—typically the determination that you are unable to manage your financial affairs. The document and applicable state law control who must make that determination and what evidence is required. Some states restrict or do not recognize newly executed springing powers of attorney.
Where both options are available, neither is inherently better. The right choice depends on your circumstances, your level of trust in the person you appoint, and your applicable state law. It is important to know when your agent’s authority begins and whether your power of attorney is durable, meaning that it remains effective if you later become incapacitated. These details can affect how quickly your agent can step in when assistance is needed.
While reviewing your existing estate plan, it is also a good time to check whether it includes everything you need. If your current plan relies only on a will, you may want to consider adding a revocable living trust, especially if you own property in more than one state. Without a trust, your loved ones may have to go through probate (the court process for settling an estate) in each state in which you own property. A trust can consolidate your property under one roof, helping your family avoid multiple, overlapping probate proceedings, saving significant time, cost, and stress when settling your affairs.
Are Your Estate Planning Documents Compliant In Both States?
Estate planning laws vary by state, particularly those governing documents such as financial powers of attorney and healthcare directives. Many states provide statutory or state-approved forms for these documents, although using those forms may not be required.
A document that is valid in one state will generally be honored in another. But in a medical emergency, speed matters, and medical providers are often quicker to act on a form they recognize. An unfamiliar document from another state may cause hesitation or delay while it is reviewed, even if it is technically valid.
For this reason, we recommend having an attorney licensed in your second state review your existing documents. If needed, they can prepare a second financial power of attorney and healthcare directive tailored to that state’s format, giving you one less thing to worry about if you ever need care while you are away.
As you prepare for your upcoming travel, call us. We are here to answer any questions to ensure that you are properly protected no matter where your travels take you this season.
Arizona Location
1400 E Southern Ave Suite 850
Tempe, AZ 85282
Office: (480) 750-7337
Email: [email protected]
