For many snowbirds, cooler weather signals the start of the annual trip south. If you plan to spend the winter in a warmer state, take some time before you leave to review your residency status, taxes, estate plan, and legal documents.

Which State Is Your Legal Home?

If you divide your time between two states, it is important to understand the difference between residency and domicile. These concepts can affect your state income taxes, estate plan, property rights, eligibility for certain state benefits and exemptions, and, in some circumstances, which state has jurisdiction over a divorce. Child custody jurisdiction is generally governed by separate "home state" rules.

You may qualify as a resident of more than one state because each state has its own residency requirements. However, you generally can have only one domicile at a time.

Your domicile is generally the state you consider your permanent or indefinite home—the place you intend to return to when you are away. Determining domicile depends on more than what you say your intentions are. State authorities may also consider your actions and connections to each state.

Spending significant time in two states can have important financial and legal consequences. It may affect:

• State income tax obligations
• Estate or inheritance taxes
• Property tax exemptions and benefits
• Property ownership rights
• Your overall estate plan

Talk with your tax advisor to confirm that you are filing the appropriate tax 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 impose taxes on particular types of income.

Owning property in multiple states can create additional legal and estate-planning considerations. This is particularly important when the states apply different property-ownership systems.

For example, 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 applicable state property laws. A spouse may nevertheless have marital, homestead, elective-share, or other legal rights in property.

If you live in or own property in more than one state, meet with your estate-planning attorney to make sure your estate plan accounts for the laws of each state.

Have You Reviewed Your Estate Plan Recently?

Life changes, sometimes without warning. Before leaving for the winter, review your estate-planning documents to make sure they still reflect your wishes both during your lifetime and after your death.

Consider the following questions:

Are Your Decision-Makers Still the Right People?

Review the individuals you have designated to act on your behalf. Depending on your plan, these may include:

• Trustee
• Personal Representative or executor
• Guardian for a minor child
• Agent under a financial power of attorney
• Agent under a medical or healthcare power of attorney

Make sure these individuals are still willing and able to serve.

Are Your Beneficiaries Up to Date?

Review the beneficiaries named in your will, trust, retirement accounts, life insurance policies, and other accounts.

Ask yourself:

• Are all named beneficiaries still living?
• Do you want to add a family member, friend, or charity?
• Do you want to change the amount someone receives?
• Do you want to change how or when a beneficiary receives an inheritance?

Do Your Beneficiary Designations Match Your Estate Plan?

Certain assets, including retirement accounts and life insurance policies, generally pass directly to the beneficiaries designated on those accounts. These assets may not pass according to the instructions in your will or trust.

Make sure your beneficiary designations are consistent with your overall estate plan.

Can Your Agent Relocate You If Necessary?

Consider whether your healthcare agent has the authority to move you to another state if you become unable to make your own healthcare decisions.

For example, if you become seriously ill or incapacitated while spending the winter away from home, you may want your agent to have the authority to relocate you closer to family or to an appropriate care facility.

Review Your Financial Power of Attorney

If you may need help managing your finances or completing transactions while you are away, determine when your financial power of attorney becomes effective.

Depending on the document and the law of the state where it was created, a power of attorney may be immediate or springing.

Immediate Power of Attorney

An immediate power of attorney generally becomes effective when it is properly executed. Your agent can act on your behalf even while you remain fully capable of managing your own affairs.

This arrangement can be useful if you want someone to assist you with financial matters while you are traveling or living in another state. Appointing an agent does not generally prevent you from continuing to manage your own affairs.

Springing Power of Attorney

A springing power of attorney becomes effective only after a specified event occurs, typically a determination that you are unable to manage your financial affairs.

The document and applicable state law determine who must make that determination and what evidence is required. Some states restrict or do not recognize newly executed springing powers of attorney.

When both options are available, neither is inherently better. The appropriate choice depends on your circumstances, the level of trust you have in your chosen agent, and the laws that apply to your situation.

Whatever type of power of attorney you have, make sure you understand:

• When your agent's authority begins
• What authority your agent has
• Whether the power of attorney is durable
• Whether it remains effective if you become incapacitated
• Whether it will be recognized in the state where you spend the winter

These details can determine how quickly your agent can assist you if you need help.

Consider a Revocable Living Trust If You Own Property in Multiple States

Reviewing your estate plan is also a good opportunity to determine whether your current plan includes everything you need.

If your estate plan relies primarily on a will, you may want to consider whether a revocable living trust would be appropriate, particularly if you own real estate in more than one state.

Without a trust, your loved ones may have to go through probate, the court-supervised process for settling an estate, in each state where you own property.

A properly structured and funded trust may allow property in multiple states to be administered through a single trust rather than requiring separate probate proceedings in each state. This can potentially reduce the time, cost, and administrative burden involved in settling your estate.

Whether a trust is appropriate depends on your circumstances and the laws of the states involved. Discuss your options with your estate-planning attorney.

Are Your Estate-Planning Documents Valid and Practical in Both States?

Estate-planning laws vary from state to state. This is particularly true for 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 always be required.

A document that is validly executed in one state will generally be recognized in another state. However, legal validity and practical acceptance are not always the same thing.

In a medical emergency, speed matters. Healthcare providers may be more familiar with the forms commonly used in their state. An unfamiliar document from another state may therefore require additional review, potentially causing confusion or delay even if the document is legally valid.

For this reason, consider having an attorney licensed in your second state review your existing estate-planning documents.

If appropriate, that attorney may recommend preparing a separate financial power of attorney or healthcare directive using the second state's preferred format. Having documents that are familiar to local healthcare providers and financial institutions may make it easier for your agents to act when needed.

Prepare Before You Head South

Before you leave for the winter, take a few minutes to review your residency status, tax obligations, property ownership, beneficiary designations, and estate-planning documents.

If you live in or own property in multiple states, make sure your plan takes the laws of each state into account. A little preparation now can help reduce complications later.

As you prepare for your winter travels, call us with any questions. We are here to help you make sure your estate plan provides appropriate protection wherever your travels take you.