It’s that time of year when thoughts of living in a warm climate appeal to those of us stuck in the frigid northeast. Those who are blessed with the opportunity to spend part of their year in Florida or another warm climate, may be interested in some of the estate planning issues that arise when you take on the status of “snowbird”.
When you become a snowbird, are you still domiciled in the Commonwealth of Pennsylvania? A domicile is where you maintain your permanent residence. Where do you vote, pay income taxes, or hold your driver’s license? These are the types of state connections that typically determine residency. The state of residence will have a lot to do with the documents you should obtain and the taxes you would pay, such as income and inheritance taxes.
Most of my clients still consider themselves Pennsylvania residents although they spend several months of the year somewhere else. Therefore, they have Pennsylvania documents such as a Will and Financial and Health Care Powers of Attorney that reflect Pennsylvania law. If they permanently move to another state, they should visit an attorney there to have their documents reviewed.
Some clients ask if they should have two sets of documents, one for each state. While it is possible to have two sets of documents, there is a risk of conflict between them. Therefore, most clients only have one set of estate planning documents. Powers of Attorney can be used across state lines for most transactions.
Pennsylvania has an inheritance tax program and will tax your assets at the time of your death if you are domiciled in Pennsylvania. If you are domiciled in another state, such as Florida, that state may not have an inheritance tax. If you are planning to spend equal time in two states, changing your domicile may have a significant impact on the taxes you pay, including inheritance taxes.
If you have real estate that you purchased in a second state, you may want to consider a revocable living trust to deal with the settlement of your affairs in the non-resident state. For example, if my client has real estate in Florida, I would want them to consider a revocable living trust to avoid probate in Florida when they pass. If they don’t have such a document, their family will need to retain an attorney in Florida to handle the probate process with regard to the property in Florida. This can be a time consuming and expensive process that could be easily avoided with a revocable living trust.
Lastly, make sure you have multiple originals or at least copies of your Powers of Attorney for financial and healthcare decision making that you can take with you when you travel. Some clients keep digital copies on their phones, just in case. There could be a crisis that occurs as you travel from state to state requiring the use of those documents. Having the Powers of Attorney with you along with contact information for your agents, will allow the hospital or other medical provider to contact your agents when a decision about your care or finances needs to be made.
