Estate plans that fell behind residency and family structure
Estate documents are signed at one moment in a family's life and then read at another. In between, people move, marry, divorce, have children, buy property in other states, and form entities. The documents often stay the same. For tax purposes, the most common gap is residency: a plan drafted for one state's rules now governs a household that lives somewhere else, owns real estate in a third state, and files nonresident returns in a fourth.
This post covers the tax facts that tend to drift away from an estate plan, and the records that let your attorney see the drift. It is not estate planning advice and it does not tell you what your documents should say. Drafting belongs to counsel. The goal here is to give counsel and your preparer the current facts.
Why residency matters at death
For 2026, the federal estate and gift basic exclusion amount is $15,000,000 per person, and it is indexed for inflation in later years. Many households will never owe federal estate tax. State estate tax is a different matter. About a dozen states and the District of Columbia impose their own estate tax, and several have exemptions far below the federal level:
- New York: $7,350,000 for deaths in 2026, with a cliff. If the New York taxable estate exceeds 105% of the exclusion ($7,717,500 for 2026), the exclusion is lost entirely and the whole estate is taxed. New York also does not allow a surviving spouse to use the deceased spouse's unused exclusion.
- Massachusetts: a $2,000,000 threshold.
- Oregon: a $1,000,000 threshold.
- Washington: a $3,000,000 exclusion for deaths on or after July 1, 2025.
A few states, including Pennsylvania and New Jersey, impose an inheritance tax on certain beneficiaries instead of, or in addition to, an estate tax. State rules change often, so check the state revenue department's current page before relying on any figure.
Two points follow. First, the state of domicile at death decides which state taxes the whole estate, so domicile evidence matters as much at death as it does for income tax. Second, real estate and tangible property located in a state with an estate tax can be taxed there even if the owner lived elsewhere.
The facts that drift
1. Domicile
A move from New York to Florida can remove New York estate tax on intangible assets, but only if domicile actually changed. The same evidence that supports an income tax residency change (where the main home is, where time is spent, where the family and important belongings are, driver's license, voter registration) supports the estate tax position. The residency and domicile post covers the tests. Documents that still describe the person as a resident of the old state can work against the move.
2. Property in other states
Real estate in a second state can require an ancillary probate there and can create a nonresident estate tax filing. Holding the property through a revocable trust or an entity may change both, but which approach fits is a question for counsel in each state.
3. Community property
Nine states use community property rules. Couples who moved from a community property state, or into one, may hold assets with different character than their documents assume. Character matters for tax: at the first spouse's death, both halves of community property can receive a basis adjustment to fair market value under IRC Section 1014(b)(6), while only the decedent's half of jointly held separate property generally does. Records showing where and when assets were acquired help counsel and the preparer sort this out.
4. Family structure
Marriage, divorce, children, grandchildren, and stepchildren change who the documents name and how gifts are counted. Beneficiary designations on retirement accounts and life insurance override the will. They are the most common place where an old plan and the current family disagree.
5. Entities formed after the plan
An LLC or holding company formed after the estate documents were signed may not be addressed in them. The operating agreement's transfer and succession terms also matter. See the holdco post for the questions an entity raises.
6. Gifts and Form 709 history
Lifetime gifts above the annual exclusion ($19,000 per recipient for 2026) use part of the basic exclusion and must be reported on Form 709. If past 709s were never filed, the exclusion used is undocumented. New York adds back taxable gifts made within three years of death to the New York estate, so gift timing can matter for New York residents even though New York has no gift tax.
7. Where a trust is resident for income tax
Irrevocable trusts are taxpayers in their own right, and states use different tests to decide whether a trust is resident: where the grantor lived when the trust was created, where the trustee lives, where the trust is administered, or where beneficiaries live. A trust created by a New York resident may be treated as a New York resident trust even after the grantor moves, although New York exempts some resident trusts with no New York trustee, assets, or source income. California looks at the residence of fiduciaries and noncontingent beneficiaries. A move by the grantor, a new trustee, or a beneficiary relocating can change which states expect a fiduciary return. Since non-grantor trusts reach the top federal bracket at about $16,000 of taxable income for 2026, state tax on undistributed trust income adds up quickly. The record to keep is a short list for each trust: grantor's residence at creation, current trustees and their states, where records are kept, and where beneficiaries live.
Portability
At the first spouse's death, the unused federal exclusion can pass to the survivor (the deceased spousal unused exclusion, or DSUE), but only if a timely federal estate tax return (Form 706) is filed to elect it. Estates that are not otherwise required to file can use the simplified relief in Rev. Proc. 2022-32 to make a late election within five years of the date of death. Many families skip the 706 because no tax is due, and later learn that the survivor's estate needed the extra exclusion. The record to keep is the decision, in writing, about whether to elect.
The scored diagnostic
Score each item 0, 1, or 2. Zero means it has not been checked. One means checked but out of date. Two means current and documented.
| Item | 0, 1, or 2 |
|---|---|
| Estate documents reflect the current state of domicile | |
| Domicile evidence is consistent (license, voter registration, home, time) | |
| Real estate in other states is listed with how it is titled | |
| Community property history is documented, if any | |
| Beneficiary designations match the current family and plan | |
| Entities formed since the plan are addressed in it | |
| Every Form 709 filed is on file, with the exclusion used | |
| A written decision on portability exists for any prior spouse's death | |
| The date of the last review by counsel is known |
A total of 15 to 18 means the plan and the facts line up. A total of 9 to 14 means a review with counsel is due. Below 9, start with the domicile and beneficiary items.
Illustrative: a move, a second home, and a new LLC
Illustrative: A couple signed wills and a revocable trust in New York in 2015. In 2022 they moved to Florida. They kept a New York apartment, bought a house in Massachusetts in 2024, and formed an LLC in 2025 to hold a rental. One spouse's IRA still names a sibling as beneficiary from before the marriage.
The facts that need counsel's attention: the documents describe them as New York residents, the New York apartment is real property that New York can tax at death regardless of domicile, the Massachusetts house can bring a Massachusetts nonresident estate tax filing in a state with a $2,000,000 threshold, the LLC is not addressed, and the IRA designation conflicts with the plan. Their combined estate is under the $15,000,000 federal exclusion, so the federal estate tax is unlikely to apply. The state questions are the ones with money attached.
The preparer's role is narrower but real: confirming Florida residency on income tax returns since 2022, filing any New York nonresident returns for New York-source income, and confirming whether any Form 709s were required.
What to send counsel
- A one-page list of where each spouse has lived since the documents were signed, with dates.
- A property list by state and how each is titled.
- Copies of all beneficiary designations.
- A list of entities with formation dates and operating agreements.
- Copies of every Form 709 filed.
Next step: pull every beneficiary designation this month and compare it to the current family and the current plan. It is the fastest check with the largest consequences.
Educational only. This is not tax or legal advice for your situation. Consult your own CPA, EA, or attorney before acting.
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