State Specific Estate Planning Statute
State-specific estate planning statute will vary significantly in each of the 50 states, addressing everything from estate taxes and the probate system to will requirements and rights of property, so understanding what your state-specific laws are is essential to the successful formulation of an estate plan.
Introduction
Estate planning might seem straightforward, but the reality is far more complex. Each state in the US has developed its own unique set of laws governing how your assets will be distributed upon your death, how much your heirs will pay in taxes, and what the legalities of your will are.
I've guided families through these turbulent waters of state legislation for years, and I can tell you from my own experience that not considering state-specific needs can be a costly mistake and cause of family conflict. Let me get you caught up on what you need to know about how your state's laws can totally transform your estate plan.
Understanding the Foundation of State Estate Planning Laws
Most people, when they think about estate planning, feel that federal law governs it all. That's an expensive assumption. While federal estate tax legislation does pervade the entire nation, most estate planning laws are for the states.
Every state has enacted its own "Estate Code" or "Probate Code" that regulates how wills are validated, trusts are managed, what probate processes are, and if estate or inheritance tax is imposed. These differences are not mere technicalities - they can substantially change the operation of your estate plan.
Here's a melodramatic instance: a well-written will in California will be completely useless in Louisiana due to differing witness requirements. And a $5 million estate will pay no state tax in Florida but hundreds of thousands in New York.
The Great Divide: Community Property vs. Common Law States
The single most significant state estate planning law difference is that it handles ownership of property during marriage. This alone can completely transform your estate plan approach.
Community Property States: Joint Ownership by Default
Nine states have community property law: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. In these states' laws, nearly everything acquired while married is owned by both spouses equally, regardless of whose name the title appears under.
This is a community property principle that applies outside of bank accounts and real estate. Your salary, investment returns, business investments, and even pension benefits accrued during marriage are usually community property. Each spouse owns an undivided 50% interest in all of the community properties.
From the estate planning point of view, this means that you can only control the disposition of your share of community property through will. Your spouse inherits the other half automatically and can divide it as they wish. This fact imposes diligent coordination of spouses in estate planning.
Community property states also have unique tax advantages. When one spouse dies, both halves of community property typically receive a "stepped-up basis" for tax purposes, which can save surviving spouses and heirs thousands of dollars in taxes on capital gains.
Common Law States: Individual Ownership Rules
The remaining 41 states follow common law rules of property, where possession is determined by whose name is written on deeds and titles. When you purchase a house in your own name during marriage, the property is yours and only yours according to common law rules.
This type of independent ownership style gives married couples greater control over their own property but requires more planning to ensure both spouses are provided for. All common law states have "elective share" laws that allow widowed spouses to inherit a portion of the deceased spouse's estate even if they were not left anything in the will.
State Estate and Inheritance Tax Differences
The state tax environment has drastic variations that may significantly influence your estate's value. Avenues of proper planning must be understood in light of such differences.
Estate Tax States
There are just 12 states and the District of Columbia imposing estate taxes as of 2025: Connecticut, Hawaii, Illinois, Maine, Maryland, Massachusetts, Minnesota, New York, Oregon, Rhode Island, Vermont, and Washington.
These state estate tax exemptions vary wide and far. Connecticut is matched to the federal exemption level of $13.99 million, but Oregon has the lowest exemption at just $1 million. Massachusetts has moved to $2 million starting in 2023, but this still hurts a group of middle-class families who happen to own homes in expensive real estate markets.
New York is particularly egregious with its $6.94 million estate tax exemption and super-high rates of up to 16%. It's the "cliff effect" that particularly makes New York's regime particularly merciless - if your estate exceeds the exemption by more than 5%, the entire estate is taxed, as opposed to merely the excess.
Inheritance Tax States
There are six inheritance tax states, which tax the beneficiaries and not the estate: Iowa, Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania. Maryland is the sole state that taxes both inheritance and estates and is thus the most expensive state to die in, from a tax standpoint.
Inheritance tax rates generally change depending on your connection to the deceased. Spouses are generally exempt, and children and grandchildren have generous rates. Less closely related parties and unrelated recipients pay more tax.
Iowa is repealing its inheritance tax, completely by 2025. This demonstrates how state tax laws are always under flux, so regular updating of your estate plan is required.
Differences in State Probate Laws
Probate procedures vary widely from state to state, affecting the time and cost of distributing estates. It can make a huge difference in your loved ones' experience after your passing.
Streamlined Probate Procedures
The majority of states have streamlined probate procedures for small estates, but the levels and procedures vary significantly. California has streamlined procedures for estates worth under $184,500, and Texas has a small estate level of $75,000.
Some states have adopted forms of the Uniform Probate Code, which standardizes and streamlines processes. Even there, however, the uniform provisions are adapted to fit local tradition.
Probate Costs and Timeframes
Probate costs vary enormously from state to state. Some set attorney fees as percentages of the value of the estate, and others allow attorneys to charge reasonable fees with no caps in statute. California has statutory fee schedules, and others like New York provide greater flexibility in fees.
The length of probate also varies significantly. Quick estates in some states are finished in a matter of months, while complex estates in other states can take many years to settle.
Will and Trust Requirements by State
State law governing valid wills and trusts differs, so it is helpful to familiarize yourself with your jurisdiction's specific requirements.
Will Formalities
Every state requires wills to be written, signed by the testator, and witnessed by two or more individuals. But the specifics are varied. Some states will accept holographic (handwritten) wills, while others require typed documents. Witnessing also varies - some states require witnesses to sign in the testator's presence, while others do not care that much.
Electronic wills is one of those subjects where state law is substantially varied. Some states have enacted electronic wills and have carefully defined plans controlling their creation and authentication, while others have mentioned nothing about electronic wills.
Trust Law Differences
State trust laws vary on issues including trustee authority, beneficiary rights, and asset protection features. Nevada and South Dakota are two states that have developed highly favorable trust laws as a means of enticing trust business, including allowing perpetual trusts and fine asset protection.
Complexity of Property Ownership
Beyond the community property/common law division, states handle property ownership differently in several respects that affect estate planning.
Joint Forms of Ownership
States do recognize various types of joint ownership with varying legal effects. Joint tenancy with right of survivorship transfers property automatically to other owners, whereas tenancy in common permits each owner to devise his or her interest to anyone he or she wishes.
A few states do allow tenancy by the entirety, a unique type of joint ownership reserved for couples and possessing asset protection advantages. Other states do not recognize this type of ownership at all.
Homestead Exemptions
A majority of states provide homestead exemptions that protect primary residences from creditors but whose character and scope vary significantly. There are those that provide unlimited protection, while others put exemptions at a specific dollar amount.
Multi-State Estate Planning Complications
If you own property in multiple states or move from one state to another, you will be faced with additional complexity in estate planning.
Ancillary Probate Requirements
Real estate typically has to pass through probate in the state it's located, regardless of where you live. So owning property in multiple states can translate into multiple probate proceedings, one per state, that will be expensive and inconvenient to your beneficiaries.
Your domicile state at death also determines which state's laws will govern your estate and where your primary probate case will be heard. States look at several different factors when deciding domicile, including where you vote, bank, and live most of the year.
Some individuals attempt to establish domicile in low-tax states before death, but this strategy must be well-documented and supported with actual changes in residence in order to work.
Planning Strategies for State Law Variations
Because of these significant state law variations, several planning strategies can be employed to avoid the traps.
Regular Plan Reviews
State legislatures update the laws periodically, and your circumstances may also evolve. Regular reviews with veteran estate planning attorneys ensure that your plan will operate effectively under current laws.
Trust-Based Planning
Revocable living trusts also escape probate in many states and provide more consistent management in the face of differing state laws. However, trust laws remain state-specific, so professional guidance is still required.
Tax Planning Techniques
Individuals who live in high-tax states have a number of techniques to minimize exposure to estate tax. These may involve making lifetime gifts, establishing charitable trusts, or even relocating to lower-tax states.
The Role of Expert Guidance
State-specific estate planning law intricacies make expert guidance essential. Something that would work perfectly in another state will prove to be worthless, or worse, counterproductive, here.
I have seen too many families that have been compelled to go through estate settlements due to their having the wrong impression that their estate plan would work everywhere equally. A will signed in Texas will not offer the same protection of the rights of a surviving spouse in a different state where the elective share laws differ. A trust that works well as asset protection in one state will have little or no protection in another state.
New Trends in State Estate Planning Laws
State estate planning laws keep evolving as legislatures respond to new family structures, economic conditions, and shifts in federal legislation.
States are simplifying probate procedures and using more technology in estate planning. Electronic notarization and remote signing of estate planning documents became widespread during the COVID-19 pandemic, and the majority of states have legalized those changes on a permanent basis.
Some states are even allowing non-traditional family arrangements and updating their codes to treat them more favorably.
Step Out in Front with Confidence
Studying state-specific laws of inheritance is not an academic exercise - it is essential to the stability of your family's financial well-being. The differences from state to state can cost your heirs literally hundreds of thousands of dollars if left unmonitored.
No matter if you are creating your first estate plan or updating one that you already have, take the time to find out how the unique laws of your state affect your situation. Don't rely on what your friends who reside in other states or general Internet resources tell you may apply.
State-by-state estate planning statutes offer a complicated but functional scenario. Understanding and utilizing experienced guidance, you will be able to develop an estate plan that will function under your state's statutes and help fulfill your personal and financial objectives.
The key is in the realization that estate planning actually is state-by-state. Your plan needs to be as unique as your state's statutes - and as unique as your family's situations and requirements.
Remember that the time you spend on learning these laws today will save your family a lot of time, money, and hassle in the future. Since estate planning is not merely distributing property - it's giving your loved ones peace of mind and security of finances.
