Estate Planning For Snowbirds

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The beginning of the holiday season signals the end of many things, the year (bye 2020!), football season, and it also signals to many of New York’s snowbirds, people who split their time between New York and Florida (or another warmer state), that their time in New York is coming to an end and the time to head south is approaching. Before winterizing their house and merging onto I-95 South, it is important for all New York snowbirds to consider what impact dividing their time between New York and Florida will have on their estate plan. Many of my snowbird clients are surprised to learn that their escape from New York’s cold weather and high taxes can complicate their estate plan. This article is intended to show snowbirds the traps to avoid.

I think of estate planning for snowbirds in three tiers. The first tier is having the basic documents in place for both New York and Florida. This is the tier where all snowbirds need to make sure that they have these documents in place. The basic estate planning documents, are a Health Care Proxy, Living Will and Durable Power of Attorney. People who divide their time between New York and Florida should have versions of these documents for both states. Unlike a Will, which you can only have one of (because the execution of a new Will automatically revokes any prior Wills), you can have a Health Care Proxy, a Living Will and a Durable Power of Attorney for New York and also have their Florida equivalents, and both the New York documents and Florida documents would be valid and effective.

It is true that your New York Health Care Proxy, Living Will and Durable Power of Attorney are valid in Florida and should be accepted in Florida. The same is true that your Florida Health Care Proxy, Living Will and Durable Power of Attorney are valid in New York and should be accepted for use in New York. However, Floridians (and their New York counterparts) are used to seeing Florida documents and your use of your New York documents may cause you some unnecessary headaches. One reason for this is naming, in New York the document in which you appoint a person to make health care decisions for you in the event of incapacity is a Health Care Proxy, in Florida that document is called a Declaration of Health Care Surrogate. In New York the person you appoint to make your health care decisions in the event of incapacity is your health care agent, in Florida that person is called your health care surrogate. In New York the document you use to designate your wishes should you be in an irreversible vegetative state or similar condition is a Living Will. In Florida that document is called a Declaration. Fortunately, in both New York and Florida the document for appointing someone to make financial decisions on your behalf is called a durable power of attorney. Additionally, in both New York and Florida the person appointed under your durable power of attorney is called your attorney-in-fact. However, New York’s form is about seven pages, plus a five page statutory gift rider, and requires lots of initials throughout the document. Whereas Florida’s form is about 18 pages, with only a few initials needed. The best practice is to have these documents prepared for both New York and Florida. You can keep your New York documents in New York and bring your Florida documents to Florida. In the event the person you appoint needs to use them, they will have no issues stemming from someone looking at an unfamiliar form.

Additionally, if you already have both New York and Florida documents, it is important to note that Florida updated its Power of Attorney law in 2011. If you have a Florida Power of Attorney from prior to 2011 that document should be updated.

The second tier of estate planning for snowbirds is avoiding an ancillary probate. This tier effects all snowbirds estate plans who own real estate in multiple states, because if you own real estate in multiple states, your estate will likely need to be probated in both states. If you are a New York resident your estate will be probated here in New York. If you also own a house or condo in Florida, there will also be what is called an “ancillary probate” in Florida. An ancillary probate is a probate in addition to the primary probate to address distribution of an asset in another state, such as a vacation home. An ancillary probate adds time, expense, and unnecessary complication to your estate. An ancillary probate will need to be done in all states in which you own property. So, if you own a home in New York, a ski house in Vermont and a condo in Florida, your estate will be probated in New York and ancillary probates will be necessary in Vermont and Florida to transfer your ski house and condo. This can be easily avoided.

By creating a revocable trust and transferring any property you own outside of New York state to that trust, you will avoid the need for an ancillary probate of any property outside of New York. Upon your passing the property held by the trust will pass by the terms of the trust, outside of the probate process. The trust, as the name suggests, is revocable by you at any time. You maintain complete effective ownership of the property in the trust and have unfettered use of the property.

The third tier of estate planning for snowbirds is domicile, or in which state you are considered a resident. The term “domicile” is defined in New York as, the place an individual intends to be their permanent home. Your domicile is the place you intend to return to when you are away. A person can only have one domicile, the theory being you can have many houses, but only one home. So, although you may have a house in New York and a condo in Florida, i.e. you have two residences, you can only be domiciled in either New York or Florida, not both. Why is domicile so important? New York Tax Law §601 imposes New York State personal income tax on “resident individuals.” Pursuant to New York Tax Law §605(b)(1), a resident individual is defined as person domiciled within the state or a person “who is not domiciled in this state but maintains a permanent place of abode in this state and spends in the aggregate more than one hundred eighty-three days of the taxable year in [New York]….”. Further, New York residents are taxed on all of their income both inside and outside of New York. Additionally, New York currently imposes an estate tax of 16% upon the estate of every resident decedent with an estate over $5,850,000. In contrast, Florida does not have a state income tax or a state estate tax. Based on the potentially significant tax savings, if you are already dividing your time between New York and Florida or are considering dividing your time in the future, where you are domiciled is an important consideration. Additionally, the state in which you are domiciled can have an effect on your long term care plan. If you wish to qualify for Medicaid to pay for nursing home care, the state where you would make a Medicaid application is the state in which you are domiciled.

No matter where you fall on the three tiers for snowbird estate planning, another factor to consider within your estate plan are some of the differences between New York and Florida law. If your Will is executed in New York under all of the formalities that would make it valid in New York, your Will should be valid in Florida. As should a Florida Will executed with all of the formalities that would make it valid in Florida be valid in New York. However, the laws of the state where your Will is probated will apply, not where your Will is executed. For example, in New York you can add what is called an in terrorem clause to your Will. An in terrorem clause states that anyone who challenges the terms or provisions of your Will forfeits any distribution or bequest they would receive under your Will. An in terrorem clause is a mechanism to deter people from challenging your Will. The theory is, if you are concerned that someone may challenge your Will, such as an estranged child, you can provide them with a small bequest, rather than with nothing, as an incentive to not to challenge your Will and potentially lose the small bequest. In terrorem clauses are enforceable in New York, but are not enforceable in Florida. If your estate plan includes the potential need for the use of the in terrorem clause, the effectiveness in New York and not in Florida is a consideration.

In New York, almost anyone you appoint can serve as your Executor, with few exceptions (such as people younger than 18 years old, people who are incompetent, non-U.S. citizens who do not reside in the U.S., and convicted felons). In Florida, the person who performs the function of an Executor is called a Personal Representative. In Florida, as in New York, your Personal Representative must be over age 18, not a convicted felon and cannot be incompetent. However, Florida also adds that your Personal Representative must be a Florida resident, unless they meet one of several exceptions. A non-Florida Resident may only serve as a Personal Representative for a spouse, parent, sibling, child, aunt or uncle, or other similarly close family members. You can also serve as a Personal Representative for your spouse’s parent, sibling, child, aunt or uncle, or other similarly close family members. The mistake people make is to appoint a best friend from out of state or their attorney or accountant from out of state. These people will be unable to serve as your Personal Representative in Florida.

If you spend significant time in a state outside of New York, it is important to consider the impact that time spent outside of New York will have on your estate plan. If you are a current snowbird or are planning on becoming a snowbird, speaking with an attorney licensed in both New York and Florida is prudent, to review your current estate plan and update it as necessary based on your status as a snowbird or to implement a snowbird friendly estate plan that saves your heirs time, money and headaches.

About the Author

Daniel R. Bernard is an attorney who focuses his practice in the areas of estate planning, trust and estate administration, estate tax planning, business succession planning, and estate litigation, with an emphasis on planning for people who divide their time between New York and Florida (“snowbirds”). Dan is admitted to the New York bar, the New Jersey bar and the Florida bar.

Dan is an attorney in the Trusts and Estates Department of the Riverhead based law firm Twomey, Latham, Shea, Kelley, Dubin & Quartararo LLP (“Twomey Latham”). Twomey Latham is a 30 attorney full service law firm with offices in Riverhead, Hauppauge, Southampton, Southold, and East Hampton.

Daniel can be reached via email at: dbernard@suffolklaw.com or by phone at 631-727-2180 ext. 321.

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