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We have a real treat for you with this month’s blog - our friend Tony has captured a great Q&A session with his new attorney from Naples, FL, where Tony is looking to domicile. Tony shows up in several of our blogs which we recommend checking out after this Q&A.
Tony is a high-earning executive from New York who recently bought a home in Florida with the intention of establishing it as his domicile. He occasionally bumps into some issues so we’re very happy he’s getting the chance to get some advice from a great attorney - Brad Galbraith, the Managing Partner at Galbraith Law in Naples, Florida.
Tony: Hey Brad, thanks for taking the time to meet with me today. I have so many questions about my current situation and I’m hoping you can help me. Can you remind me what you do here?
Brad: I am a Florida Bar Board Certified Wills, Trusts and Estates attorney. At Galbraith Law, we help high net worth clients who have complicated lives protect their loved ones from predators, creditors, and divorcing spouses through comprehensive estate planning that emphasizes a lifelong relationship between my client, their family, and our team.
Tony: You’re exactly who I need to be talking to! To start, we’re excited to get settled down here in Naples but I’m a little worried about cleanly breaking away from New York. Are there precautions I should take to ensure New York does not come after me for taxes after I change my domicile to Florida?
Brad: We recommend that an individual or couple changing domicile from New York to Florida take six steps immediately: (i) download the TaxBird app to track their time in New York, (ii) file a Declaration of Domicile, (iii) file for homestead, (iv) register to vote in Florida, (v) register cars in Florida and (vi) obtain a Florida driver license. Additionally, it is important to generally establish as many connections as possible to Florida and, to the extent possible, minimize connections to the former state. This would include things like establishing relationships with professionals (e.g., attorneys, CPAs, financial advisors, etc.) in Florida, updating estate planning documents to state that you are a resident of Florida, transferring financial assets to Florida institutions, using the Florida account to pay the majority of your bills, spending as much time as possible in Florida, and generally establishing social and community ties to Florida. The end goal is to make sure that if New York ever questions your change of domicile, you can clearly document that on balance most of your connections are in-fact to Florida.
Tony: My estate planning attorney in New York was excellent and we were happy with our estate planning documents. Do we really need to update them now that we are Florida residents?
Brad: Yes. Your New York estate planning documents remain valid estate planning documents once you change your domicile from New York to Florida – they do not become invalid the moment you become a Florida resident. However, they are interpreted under Florida law and that can cause a number of issues. For example, if you have named a good friend or CPA to serve as your executor/personal representative, that individual may not be permitted to serve as personal representative in Florida. Your ancillary estate planning documents (will, financial power of attorney, health care surrogate designation) are largely worded to follow along with the New York statutes. Now that you are a Florida resident, we recommend replacing these ancillary estate planning documents with new Florida documents that follow along with the Florida statutes. We may be able to simply amend your revocable living trust to provide that it will now be governed by Florida law.
Additionally, if your change of domicile is ever called into question by the State of New York, they will hold it against you if your existing estate planning documents still indicate that you are a resident of New York.
Tony: Speaking of a revocable trust. I have heard that probate in Florida can be pretty unpleasant and I want to make sure that my wife and children can avoid it at my death. I signed one back in 2003 – doesn’t this ensure that at my death my spouse and children can avoid the probate process?
Brad: In that case, we should replace your revocable trust instead of amending the existing one. We almost always recommend replacing a revocable trust this old with a new Florida revocable trust because planning options and tax laws have changed significantly since 2003.
In regard to probate in Florida, it often takes upwards of a year and the fees typically range from 2%-3% of the probate estate assets. It is true that one of the major benefits of revocable living trusts is probate avoidance, however, this benefit can only be obtained if the trust is properly funded. This involves re-titling assets in a client’s individual name to the client’s revocable living trust. Just having a revocable living trust will not avoid probate and this is a very common misconception. You should make sure that your assets have been properly titled and should have an attorney review your asset titling every few years. A big focus of our practice is making sure our clients avoid probate.
Tony: I have friends that are leaving their assets in trust for their children. But my children are both in stable marriages and have good jobs – wouldn’t it be simpler to just leave all of my assets outright to my children?
Brad: Many clients walk into our office with existing estate plans that leave assets outright to their children, or in trusts that are distributed to children outright in phases (e.g., 1/3 at 30, 1/2 at 35, all at 40). Many people simply don’t realize that a much better option is to leave their assets in a separate trust for each child and allow each child to step in and serve as trustee of his/her separate trust at some point (often age 30 or 35). This structure will provide each child with essentially the same access to the assets as if the assets were distributed outright, but with the added benefit of creditor protection. A phrase I hear all too often is, “but my son doesn’t have any creditor issues . . .” Without question, the creditor we are most concerned about is a divorcing spouse. 50% of all marriages end in divorce, and it makes little sense to leave assets to children in a way (outright) that will likely subject the assets to claims of a divorcing spouse. We advise almost every client to leave assets to children and grandchildren in trust to protect them from all creditors, including a divorcing spouse, personal injury claims, and any other unexpected creditor.
Tony: Brad, this has been really helpful. Sounds like I have a bit to think about and some changes to make. I really appreciate all your help!
Brad: Happy to help! We’re always here if you need anything.
Brad, thank you for taking the time to meet with Tony and give him some much-needed advice. This is some great information for him and the rest of our readers.
If you have questions for Brad or would like to contact him, you can find his information at https://www.galbraith.law/.
If you have questions, comments, or feedback about the blog, please reach out to jared@ware2now.com.
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