When my sister moved to the South, she frequently used the term “snowbirds” to refer to people who lived in the northern part of the United States during the summer months and in the southern part during the winter months. Living on the Gulf of Mexico, many of her neighbors and friends were retired and had these living arrangements. With the increase in remote working environments due to the COVID-19 pandemic, more people may be tempted to have multiple residences in order to maximize time spent in warmer weather.
If you will be heading for warmer weather this winter, there are a few things you should consider before hitting the road.
What is happening in your destination state?
Because we are still in the midst of a pandemic, it would be prudent to do some research about your winter destination. How many COVID-19 cases has the state had? Are these numbers trending upward? Upon your arrival, will the local or state government require that you quarantine for a period of time? Lastly, are there any additional local orders that you should be aware of, such as a requirement that masks be worn indoors or restrictions on dining in restaurants?
Which state do you consider your home?
Residence and domicile may be used interchangeably but you need to understand the difference between them. Residence is a home you expect to live in for a temporary or short period of time. Conversely, domicile is the place where you permanently live and where you intend to remain indefinitely or return to. Any place you own or live for a period of time can be your residence and you can have multiple residences. But you can have only one domicile. Your domicile is the location you declare in legal documents, such as registration for voting, vehicle registration and payment of taxes.
Since you are spending time in two (or more) states, you should meet with your tax advisor to confirm that you are filing the appropriate tax returns and have a plan in place to maximize the potential differences in tax laws. For example, Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming do not have any personal income tax!
Have you reviewed your estate plan lately?
Your state of domicile also impacts your estate planning and family law matters. If you are contemplating a “snowbird” living arrangement, you should meet with us to discuss the estate planning implications of owning properties in multiple states, especially if you own in both a community property state (i.e., Wisconsin) and a separate property state (i.e., Illinois).
Before you depart, locate and review your estate planning documents. Life changes are common and sometimes occur without warning! Having an up-to-date estate plan helps ensure that your wishes are carried out during your lifetime and upon your death. In addition, you should ensure that your estate planning documents are accessible at your secondary residence since you may be spending several months in that location.
The following questions can help determine if your estate planning documents still meet your needs.
- Do you still want your named fiduciaries (i.e., the trustee, personal representative, guardian for a minor child, and agents under a financial power of attorney or health care power of attorney) to act on your behalf, and are they still able to serve in that role? Will there be any issues for these named fiduciaries to serve if you are in a different state?
- Are your named beneficiaries still alive? Are there any additional individuals or charities you would like to leave something to? Do you want to make any adjustments to the amount of an inheritance or the manner in which you are leaving an inheritance to a beneficiary?
- Do your beneficiary designations for retirement accounts and/or life insurance policies match the rest of your estate plan?
- If you need to move for health reasons but cannot make the decision for yourself, does your agent have the authority to relocate you to another state?
Additionally, you may require assistance with financial matters or transactions while you are away. For this reason, you should review your financial power of attorney to determine if it is springing or immediate. A springing power of attorney allows your agent to act only when you are no longer able to act on your own (as determined by a physician or, in some instances, a judge). By contrast, an immediate power of attorney allows your chosen agent to act on your behalf right away, regardless of your current ability to act for yourself.
While reviewing your existing estate plan, you should evaluate whether it includes all of the necessary documents. If you currently have a will-based estate plan, it may be time to add a revocable living trust to your estate planning portfolio. This is especially important if you own property in more than one state. Without a trust to consolidate ownership and administration, your loved ones may end up going through multiple probate administrations in different states or counties. This can increase the time and cost of settling your affairs at your death.
Are your estate planning documents compliant in both states?
Estate planning laws are state specific and for certain documents, such as the financial power of attorney and health care power of attorney, each state may have its own statutory forms. While it is possible for a doctor or hospital in one state to honor a document that was validly executed in another state, it will be faster for medical personnel to honor your wishes in an emergency if your instructions are in the form that is familiar to them. We suggest that you have an attorney licensed in your second state review your estate planning documents for compliance, and if necessary, prepare a second financial power of attorney and health care power of attorney. However, you need to ensure that this second power of attorney does not inadvertently revoke the first power of attorney from your domicile state!
We Are Here to Help
As you prepare for your upcoming travel, please do not hesitate to give us a call. We are here to answer any questions and to make sure you are properly protected no matter where you may roam. We are available to meet with you in person or via video conference.