Estate Planning for Florida Snowbirds

Many retirees known as “Snowbirds” split their time between warm sunny Florida winters and another colder northern state each year. This can be a great lifestyle, but it creates several legal and financial challenges that must be clearly understood for successful estate planning.

Different states have different state laws regarding wills, trusts, taxes, and healthcare decisions. This is especially true when it comes to multi-person ownership, multi-state property and taxation.

These can be very complicated and can have a major impact on how your assets are managed after your death. Understanding these variables can be crucial to minimizing taxes, avoiding multi-state probate and having a solid plan that works effectively across state lines.

Snowbirds have special needs splitting homes, bank accounts and legal documents in two different states. This requires careful financial planning to navigate two separate legal systems and avoid problems with conflicting wills, powers of attorney, and multi-state probate. Disputes over residency or domicile requirements frequently result in lengthy delays in the distribution of assets.

Differences in each state’s estate taxes can have a major impact upon what is left over for the heirs. Each state also has its own signing and witnessing rules and legal documents that are acceptable in one jurisdiction which may not be recognized in another.

Establishing Florida as Your Legal Domicile

You can have residency in more than one state, but you are domicile in only one state which determines the state that has jurisdiction over the execution of your estate after your death. Florida is one of the very best states in the country for seniors because it has no estate or inheritance tax, no state income tax, and strong homestead tax deductions.

To prevent your other northern state from attempting to claim you as a resident it’s important to take several steps to establish and fully comply with Florida Domicile requirements. These include:

• File a Florida Declaration of Domicile that is usually done with the county clerk
• Obtain a valid Florida Driver’s License
• Register to vote in Florida
• Spend 183 days of the year or more in Florida
• Use a Florida address for tax returns and other official documents
• Claim the Florida homestead exemption on your property

Failure to maintain and be able to provide up to date records of these documents may lead to tax challenges from the northern state that probably has a higher taxation rate than Florida, especially if you are in a higher net wealth bracket.

Updating Your Will and Legal Documents for Florida Law

Be certain your will, power of attorney and advance directive complies with Florida law. Healthcare directives may not automatically be honored outside the state in which they were created.

Signing and witnessing laws for these documents differ between states. Florida snowbirds need to know their wishes will be honored and enforceable in whatever state they reside. Hospitals may hesitate honoring out-of-state directives. Florida has its own laws for health care surrogate designations and living wills.

Avoiding Multi-State Probate

Owning real estate in more than one state means your estate may be forced into ancillary probate. This is a secondary probate process that becomes necessary when a deceased person owned property outside the jurisdiction of the person’s home state. Its purpose is to make certain those assets end up in the hands of the rightful heirs. This can add months or years to the disbursement of assets.

Strategies for Avoiding Multi-State Probate

Real estate must go through probate in the state where it is located unless steps are taken to avoid that by setting up trusts. Creating a revocable trust is one of the most effective estate planning tools for Florida snowbirds.

Revocable trust enables probate to be avoided in all states. It maintains full control of your assets and simplifies the execution of your estate to your heirs. Property owned in Florida can also be titled into the same trust as property in another state.

Especially with assets that are jointly owned, a revocable trust can greatly simplify the process and enable property to be transferred privately.

Florida Lady Bird Deeds

Florida has Enhanced Life Estate Deeds, which are also known as Lady Bird Deeds that enable you to keep control of your property during your lifetime with the property being transferred automatically to beneficiaries upon death. It avoids probate in Florida upon death.

The difference between a Lady Bird Deed and a revocable trust is that the deed can only be used to transfer real property. Whereas a trust can convey any type of property. Most northern states do not have Lady Bird Deeds.

Review of Beneficiary Designations on all Assets

Florida snowbirds  frequently have bank accounts and retirement accounts in two different states. For example, when you have a bank account with a designated beneficiary, that usually passes outside of probate because it overrides your will.

Make sure your primary and secondary beneficiaries are named in case the primary beneficiary dies before you do. Review your IRAs, 401(k)s, brokerage accounts, life insurance policies and annuities to be certain they are up to date.

Working with Attorneys in Both States

Coordination between attorneys in both states is often necessary to make sure everything is seamlessly compliant and support each other. This is important to head off what can often happen with conflicting instructions in documents that are not coordinated, or not compliant in the other state to minimize tax risks and ensure healthcare decisions are honored.

Coordination with attorneys in both states ensures consistency and avoids future disputes.

Store Documents Safely in Both States

Keep original documents in a fireproof safe in your domicile, your primary residence. Store certified copies of these documents in your secondary state. Make sure digital copies are made. Be certain your executor knows where these records are kept and has access to digital copies.

Having an advanced health directive on file with your doctor will ensure decisions can be made in a timely manner that could affect medical decisions.

Reduce or Eliminate Taxes by Making Florida Your Legal Domicile

Compared to most northern states, Florida generally offers much better tax advantages for retirees. Be certain you have successfully established Florida residency if you are living in two states each year.

Be mindful of the 183 or more days of the year residence and have all of the supporting documents like driver’s license and voting records to assure you receive the  benefits you deserve!