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Clients and many taxpayers often wonder whether it might be beneficial in retirement or while still working to change their place of residency as a way to minimize their current and future state tax obligations, or as part of their long-term strategy to minimize estate taxes to a more tax-friendly state. While most states tax all or a portion of the income of their residents, certain states like Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming have no state income tax, and New Hampshire and Tennessee do not tax earned wages. These and other states may not have “state” estate and/or inheritance tax as well, making them very appealing for those looking to change their residency in the long-term. 

Taxpayers often utilize gifting as part of their estate plan. However, determining the applicability of the Massachusetts estate tax can lead to some unexpected results when there are lifetime gifts.

Rule #1: When in doubt, refer to the trust document; an investment policy for a trust cannot be created without it.
One advantage of creating a trust is that the grantor can have it tailored to his or her needs; therefore, although there may be provisions in common, trust documents vary widely.

Trusts are a great way to put conditions on how, when, and to whom your assets will be distributed after you pass away. However, there are several options and specific terms to know when it comes to setting up a trust, and many people aren't sure of the best path forward.

To help explain, I've put together some frequently asked questions and answers on the subject.