Out of State Estate Planning

Did you recently retire to Arkansas from another state? The legal complications of moving from state to state are not as difficult as they were in past years but you still need to be knowledgeable about the tax and legal issues that can differ from state to state.

For example, if you sold your home in another state recently, you probably do not owe any capital gains tax on the sale, but you usually do need to file a final state income tax return for that state. The good news is that you will probably not owe any tax on the sale if your profit was less than $500,000 (this exemption may vary from state to state, but the federal exemption for a married couple is up to $500,000 in profit on sale of the principal residence).

What about your estate planning documents, including your Last Will and Testament, Durable Power of Attorney, and advance directives? Are these documents effective in Arkansas? As a general rule, the answer is yes. A legal document properly executed in another state is effective in Arkansas. However, a durable power of attorney and health care advance directives typically need to be updated to include the statutes of the state where you currently reside.

But then the legal system always has exceptions to consider. Do you have children that you are not providing for under your Last Will and Testament? Arkansas has a law, known as the “pretermitted heir law” that requires your will to at least mention the child, even if you do not wish to give that child anything under your will. Likewise, if you have a deceased child leaving children, you need to mention those grandchildren’s names in your will. Failure to mention the child or grandchild can result in that person you wished to disinherit instead receiving a portion of your estate, despite the terms in your Last Will and Testament.

What about Arkansas estate tax? Fortunately, Arkansas has eliminated its state estate tax, so that is not a problem. The federal estate tax still applies to estates in excess of $5,490,000 for 2017, and there are even larger estate tax exemptions for married couples.

Do you still own real estate in another state? For example, many families own vacation condominiums in other states? If so, you will want to plan for that to avoid “ancillary probate” (a probate court proceeding in another state.) This can be an expensive and time consuming legal problem for your surviving spouse or children.

In summary, if you have moved here from another state, the laws are usually not significantly different from state to state. However, we typically advise that you have an attorney review your out of state documents, and possibly make updates to your documents in accordance with the laws of the state where you currently reside. Further, an experienced estate planning attorney can advise you on any other issues that might affect your estate plan now that you are a resident of Arkansas.

Tiffany is an associate attorney at Farrar & Williams, PLLC and can be contacted at 501-525-4401 or by email at tiffany@farrarwilliams.com . She can answer any questions you have about this subject.

By: Manda Bass