Imagine this scenario: You live in Clarksville, Tennessee, and you established a living trust while a resident here. But now, whether it's for a job, family, or another reason, you are moving to neighboring Hopkinsville, Kentucky. Or may the scenario is the opposite. You currently live in Kentucky but due to the favorable economic climate just across the border, you have decided to move to Tennessee to start a small business.
In either event, will your living trust remain valid?
Living trusts are precise estate planning instruments established according to the laws of the state where created. It's natural to wonder whether or not a relocation out of the state impacts the trust.
There are many factors that must be considered, but typically speaking, you will likely be able to keep your current living trust – if that's your preference. But you will also likely have to make amendments to it to make sure it remains valid.
Here are some key factors to keep in mind if you established a living trust in one state but are now moving to another state, like Kentucky or Tennessee.
Points to Keep in Mind if You Have a Living Trust and Relocate to Another State
As mentioned, you will need to make some amendments to a living trust when you move from state to state. Here are some key points to keep in mind when doing so.
Determining Trust Administration Matters
The state where the trustee resides is usually the state that has jurisdiction over the administration of the trust. Jurisdiction matters if the trustee ever uses the state's courts to determine administration matters. The problem here is this: Different states have different perspectives on what constitutes administrative matters, so what may have constituted administrative matters in your home state may not be the same in the new state.
Interpreting Living Trusts
When you create your living trust, usually there is a clause that states what law applies when interpreting the document. If you lived in Tennessee when it was created, most likely it states that Tennessee law applies. Same for any other state. The problem is that when you move from your original state, you may not want your former state laws to be applicable to your trust. It may be better to update the trust to dictate that the laws of your current state now apply to the interpretation.
Understanding the Property Laws of Your State
If the living trust is funded by real estate property, then understanding the state's property laws is important. Tennessee is an equitable distribution state, which means marital property is not automatically assumed to be equally shared by spouses. Kentucky is the same. But if you move to a community property state, that can impact the overall meaning and execution of the trust. In community property states, marital property is equally shared.
It is also important to keep in mind that you may have – because of the relocation – sold or purchased new real estate that you may want to add or need to remove from a trust.
Revoking a Living Trust
A living trust is revocable. Though you may not need to revoke a living trust when moving from one state to another state, it may be easier to revoke and create a new one. It will depend on the facts, the circumstances, your intentions, and the states involved in the trust.
The Key Takeaway
A living trust created in Tennessee is typically valid in all of the other states, but to ensure it remains valid upon a relocation, you may need to amend the trust. Speaking with an experienced estate attorney in the state to which you move will be helpful in making sure the living trust does or is set up to do what you intend(ed) it to do while you are alive and thereafter.
Keep in mind, too, if you relocate out of Tennessee or Kentucky, you'll want to make sure your entire estate plan is updated accordingly, too.