Providing clients with tax advice is part of the DNA of many holistic advisors. However, staying abreast of the changes in the tax code can be a challenge. Very often, advisors are in a unique position of trust and if they are adept on the subject, they can help clients adjust their financial plans to reflect the changes. During the month of March in my Road to Independence blog, we’ll discuss ways you can assist your clients in the area of tax planning (and view other practical articles on tax planning in ThinkAdvisor’s 22 Days of Tax Planning Advice home page).
Many clients choose to relocate when they retire. If you have a client who is considering a move, there’s a lot you can do to help. The key is to understand the nuances of the income and estate tax laws of various states. You certainly don’t have to be an expert on all of them. But you do need to know how to identify certain key issues. Let’s begin with estate planning.
Community Property Versus Common Law
Married clients who move from a community property state to a common law state (or vice versa) will likely need advice. For example, if the couple moves to a community property jurisdiction, they may wish to keep their assets titled as they did when they lived in the common law state. Technically, their assets may not hold the exact same titling, but the percentage of ownership could remain the same.
Conversely, they may prefer to treat all assets as community property. Even with community property states, of which there are nine, the laws may differ greatly from one state to another (LINK). Whatever the case, it would be wise to engage an estate and tax attorney in the client’s new state. This person should bring increased expertise to the table as well as the ability to draft any required documents when needed. If the move was to a common law state, their property may be considered quasi-community.
What’s the role of the advisor? It depends in part on your view. Personally, I believe the advisor should identify potential issues and assist the client in finding a qualified attorney to assist. If the client is moving away from your state, you could ask a local estate attorney for a reference to an attorney in the client’s new state. Once a potential attorney is found, you could even call them and conduct a pre-screening interview on behalf of the client.