Estate Planning Considerations When Moving to a New State

We often get questions about what happens to an estate plan if a person moves out of state. Relocating to a new state can have many financial and legal implications, especially when it comes to estate planning. Laws governing powers of attorney, health care directives, taxes, and property ownership can vary widely from one state to another. To ensure your estate plan reflects your wishes and does not cause complications, consider addressing the following key areas if you move away from Alaska.

1. Powers of Attorney and Advance Health Care Directives

As a refresher, your power of attorney (POA) allows someone to act on your behalf for legal, financial, and some personal matters. Your advance health care directive (AHCD) appoints a person to make health care decisions if you are incapacitated and specifies your medical preferences for end-of-life care. While POAs and AHCDs executed in one state are often honored in another, there can be issues if the language or form doesn’t align with the new state’s requirements. For example, one of these forms executed in a different state may be subject to a higher level of scrutiny. This could cause delay for your agent who is attempting to care for you and manage your affairs.

When moving to a new state, you may want to re-examine whether your current agents are still the best choice. It may be better to name people who are closer to your new home as agents under your POA and AHCD. For this reason, and because financial institutions and medical providers in your new state may prefer or require local forms, you may want to execute new POAs and AHCDs using an estate planning attorney licensed in your new state. 

2. State Income Tax

State income tax laws can influence estate planning decisions, especially regarding trust structures and retirement account distributions. You should determine if your new state has an income tax and how it treats retirement income, capital gains, and trust income. You should consult a financial and tax advisor about whether to restructure any of your assets for optimum tax efficiency.

3. State Estate Tax

Not all states have an estate, gift, or inheritance tax, but those that do often have different exemption amounts and rules than the federal laws regarding gift and estate tax. First, check if your new state imposes a state-level estate, gift, or inheritance tax. If so, you should meet with an estate planning attorney in your new state to review how you might update your estate plan to minimize the tax exposure after you die. This would likely involve a combination of trust planning and lifetime gifting strategies.

4. Community Property vs. Separate Property

States fall into two broad categories regarding marital property laws: community property states and separate property states. Alaska is a separate property state with an “opt-in” community property law, and many Generations clients have Alaska community property agreements designating certain property as community property.

When acquiring property in your new home state, your ownership will be governed by that state’s laws. Consider meeting with an estate planning attorney to determine the “character” (community vs. separate) of your property in your new state. For example, you may want to enter into a marital property agreement to change the character, or the new laws may affect the titling decisions you make with your assets. These decisions will affect how your property is treated during life and at death.

If you are not married but are in a committed relationship, note that some states have laws acknowledging property rights and arrangements between unmarried, committed couples. Depending on the nature of your relationship under your new state’s law, this could affect property rights at the death of the first partner to die, or in the event that you terminate your relationship during life.

5. Establishing Domicile

Establishing domicile in a new state is not just about changing your address—it also has legal and tax implications, especially for determining where your estate will be administered and how you are taxed. Consider updating things like your driver’s license, voter registration, and mailing address to reflect your new home. Updating your will and other estate planning documents to reference your new domicile could also be helpful. Note that where you are domiciled at the time of death can impact the probate process and other applicable state laws during estate administration.

Final Thoughts

When you move to a new state, it's wise to review and, if needed or advisable, revise your estate planning documents. While your estate planning documents should still be legally valid in a new state, they may not be optimal or may not function as you originally intended. Working with an estate planning attorney licensed in your new state will help ensure that your documents meet local requirements and that your intentions are realized.