By: Kevin R. Album, Esq.
You finally did it. You worked hard, put the kids through college, saved enough money, and now your movers are packing up a moving truck destined for the warm Florida climate. When you move to a new state, you will need to find new doctors, new drycleaner, new favorite restaurant, and just about new everything. One item that is often overlooked amid the chaos of moving your family across the country is making sure your trust moves with you to Florida. Failure to “pack” your trust for the move could: make the trust administration more challenging for you or the successor trustee, trigger unwanted taxes owed to your previous state, and unintentionally thwart your planning.
The Situs of your Trust and Taxes
Each trust has a domicile, but for trusts we don’t use the term domicile, instead we refer to a trust’s domicile as a trust’s “situs”. Situs means the location where a trust is located and also where it is subject to jurisdiction for state taxes. Generally, a trust document names the state you live in when the trust is created as the situs of your trust. Therefore, when the trust document names a situs, that is the state that holds jurisdiction for taxation of your trust (even after your move to Florida). If no situs is named in a trust document, then common law and state trust codes will give guidance to the trustee on how to determine the proper situs of a trust.
If you have a revocable trust, a written amendment can be utilized to change your trust’s situs to a new state. If you have an irrevocable trust (such as a special needs trust, life insurance trust, or charitable trust), you still may be able to change your situs but would likely not be able to amend your trust in order to do so. The most common ways that an irrevocable trust can be revised in Florida are by judicial modification, non-judicial modification, combining multiple trusts into one trust, or decanting (creating a new trust and “pouring” the majority of the contents of the old trust into the new trust). The options available to change an irrevocable trust’s situs will depend on both the language of the trust and what is allowed under Florida’s Trust Code.
Your trust’s situs will determine which state holds jurisdiction for tax purposes. Florida has no state income tax, no estate tax, and no inheritance tax. Therefore, it is possible that Florida may have more advantageous tax laws than the state you moved here from. As a result, when a person moves to Florida, changing the situs of a trust is often desired. If you don’t transfer the situs of your trust to Florida when you move here, your previous state may claim jurisdiction to tax your trust.
Choosing your Trustee and Personal Representative Wisely
If you named a friend or family member residing in another state as trustee of your trust, they can likely serve as the trustee of your trust in Florida. However, if a probate is also required, a friend (non-relative) would not be able to serve as the Personal Representative of your Estate when you die as non-relatives that do not reside in Florida usually cannot serve in that role.
If you determine you want a corporate trustee, under Florida law, banks and trust companies must be incorporated under the laws of Florida and have trust powers or else they are not qualified to serve as trustee of your trust. Therefore, if you named a bank or trust company that is not located in Florida as your trustee, the company may not qualify to serve as the trustee of your trust. The failure to have a proper trustee or successor trustee in place for a trust leads to the appointment of a new successor trustee by either the beneficiaries of the trust or a court holding jurisdiction over the trust.
Homestead in Trust
If you purchase a home in Florida and reside there, you likely will file for a homestead tax exemption with your local property appraiser’s office to save money on your annual real estate taxes. However, Florida’s homestead laws also have restrictions on the devise of a homestead property. For example, if you purchased your Florida home in the name of your out-of-state trust, you may have unintentionally made an improper devise of the Florida home to your trust that could result the Florida home being pulled out of your trust and subjected to probate in Florida after you die. If you have improperly devised your Florida home to your trust, it can usually be corrected to meet your wishes by amending the trust and/or by executing new deed(s) that accomplish your estate planning goal for the property.
When moving to Florida with an out-of-state trust, it is prudent to have an estate planning attorney review your trust to see if there are any items that need to be updated to ensure your wishes are met, and there is no added strain upon the trust’s administration resulting from your move to Florida.
Kevin Albaum is an attorney in the Elder Law Practice at Clark, Campbell, Lancaster & Munson, P.A. Questions can be submitted online to email@example.com.