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Blog Post

Out of State Estate Planning

Manda Bass • Jul 10, 2017

Written by Tiffany Tucker, an associate attorney at Farrar & Williams, PLLC

 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 healthcare 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.

14 Nov, 2022
Communicating with your family about your estate plan is a sensitive but important topic. The need for good communication between seniors and their adult children is important as the children often have a role in the estate plan (whether it be as Agent under a Power of Attorney, Executor under a Will or Successor Trustee of the Family Trust). In addition to the basic estate planning structure, the discussions can include topics including when the senior should discontinue driving his or her car, when the senior should consider moving to residential care, and a number of other difficult topics to discuss. In addition to the above talks, there is another kind of talk to be had with your adult children. That is the talk by the parents to the adult child about how the adult child should protect any inheritance the adult child receives from divorce or creditor claims. If the adult child receives an inheritance, and co-mingles it with his or her spouse, then the inheritance is usually split 50/50 if there is a subsequent divorce. This is a result that neither the parent nor the adult child ever meant to happen. They simply did not understand the complex rules pertaining to a divorce (which varies from state to state). An inheritance should not be co-mingled with the spouse, unless the marriage is very solid and mature. What does co-mingling mean? It means depositing any inheritance into an account titled in the name of the adult child and his or her spouse. Another example would be the adult child purchasing a new home with the proceeds of the inheritance and titling in joint tenancy with his or her spouse. In either of those situations that normally results in the daughter-in-law or son-in-law being entitled to one-half of the amount so co-mingled. Further, if an adult child has creditors that they may be attempting to avoid, the parent should be aware of this so as to possibly structure the inheritance to protect the assets. This is a critical talk to have with the adult child. If one of your estate planning goals is to keep your in-laws out of your estate (or to protect it from your children’s creditors) so as to preserve it for your children and grandchildren, you should have your estate pass in trust for your adult children in a manner that they have generous access but it cannot be co-mingled. This is a common estate planning goal and can be accomplished with proper planning. Wesley Harris is an associate attorney at Farrar & Williams, PLLC, a law firm limiting its practice to trusts, estate planning, and elder law, located at 1720 Higdon Ferry Road, Suite 202, Hot Springs, Arkansas, and can be reached at (501) 525-4401 or at wesley@farrarwilliams.com . Wesley can answer any questions you have about this subject.
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