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| Migrating Mistakes | |
Provided by the Law Offices of RICHARD
MAYBERRY Committed to providing the highest quality estate planning legal services for individuals, families and businesses |
It
seems we are constantly on the move. Whether by necessity or choice, many
moves are from one state to another. Oftentimes these moves not only
affect your wardrobe, but also affect your Life & Estate Planning. If
you have, will or may experience an interstate relocation, then you should
make proper plans for both the seasonal climate and the legal climate in
your new state. While the failure to properly plan for the seasonal
climate can unpleasantly impact your health, the failure to properly plan
for the legal climate can unpleasantly impact your wealth. Domicile The first step is to establish your domicile (permanent residence). You must quickly and effectively establish your domicile in one state, and one state alone. Why? Without one domicile for all legal purposes, you may unwittingly expose your wealth to income, gift and estate taxation in multiple jurisdictions. State governments are hungry for tax revenues and aggressively pursue every potential taxpayer. For a checklist to help you establish domicile, see our Pocket Protectors on page four. Real Estate Probate Do you own real estate in more than one state? If so, then probate may be required in each state to transfer title upon your death. Should you want to avoid potential multi-state probate of your real estate, then competent legal counsel should be sought to evaluate your options. For example, some states permit the testamentary transfer of real estate through special non-probate transfer deeds. Also, multi-state probate may be avoided when title to all of your multi-state real estate is held by a trust or other legal entity. Community Property Caveat For married couples, there are two property law systems in the United States: Common Law and Community Property. The majority of states follow a Common Law system. However, Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin follow a Community Property system. Although the general approach to Life & Estate Planning is the same under each system, there are significant differences. For example, in contrast to the Common Law system, each spouse domiciled in a Community Property state has a vested one-half interest in any property acquired during their marriage. [Note: An exception is made for property either spouse receives by gift or inheritance, but only if they carefully maintain the character of ownership as Separate Property without commingling.] Additionally, unlike under the Common Law system, appreciated Community Property enjoys a unique tax benefit upon the death of one spouse. Upon the death of one Community Property spouse, the surviving spouse receives a stepped up basis on both the one-half interest in the Community Property inherited from the deceased spouse and also on the surviving spouse’s one-half interest in the same Community Property. This means the surviving spouse will recognize no capital gains taxes on any subsequent transfer of such Community Property up to its fair market value on the decedent’s date of death. In a Common Law state, only the one-half interest of the deceased spouse receives the stepped up basis. However, even Community Property couples can forfeit this unique tax benefit when they relocate to a Common Law state without proper planning. Scheduling Solutions Life & Estate
Plan Review |
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