How Geography Can Wreck Your Estate Plan

0:00Your estate might owe hundreds of thousands of dollars, or you might save your estate hundreds of thousands of dollars, all based on where you live. Today, I break down a listener question about a state taxes, domicile, and owning property in multiple states. From Washington DC to Maine, Georgia and Kentucky, I'll walk through how a state and inheritance taxes at the state level actually work, and where people get tripped up. If you've ever wondered how geography affects your estate plan, today's episode is a great place to start. Welcome to the Death Readiness Podcast. This is not your dad's estate plan podcast. I'm Jill Mastriani, former state attorney, current realist, and your guide through Will's Trust, probate, and the conversations no one wants to have. If your Google search history includes, do I need a trust? What exactly is probate? And am I supposed to do something with mom's will?

1:00You're in the right place. The last time I was in Half Moon Bay, California, visiting my best friend Lauren, there was an open house for a beautiful home just around the corner from where she lives. I love going to open houses, and since this one was so close, we decided to walk over. The moment I stepped inside, I stopped being a casual observer. I walked the house carefully, I chatted with the real estate agent, I asked to see the office shed in the backyard, the one where I'd be recording this podcast. I examined the fence to see what adjustments I'd need to make for our dogs. As we were leaving, Lauren stopped and said, wait, I'm confused. Are you actually thinking about moving out here? Someday, I'd love to live on the same street as my very best friend. For many reasons, that's not an option right now. But if and when I make it big, we'll revisit that idea, along with the long list of pros and cons already living in my head. And here's what's firmly in the pros column today.

2:02My daughter says Lauren's house is her favorite place in the world. My husband loves California, I love California, and I love Lauren deeply. For now though, instead of me moving west, Lauren is coming east. She's making her a very first trip to Michigan next month. Maybe I'll take her to an open house here. The reality is that it's far less expensive to live in the Metro Detroit area where I am than it is to live in Half Moon Bay. If I ever move to California, it won't be to save money. It will be because I've decided that's how I want to live this one life I have. Today's Tuesday triage episode is focused on a very specific financial question, estate taxes, because that's exactly what today's listener, Roberta, asked about. But as much as we're going to talk about the financial side of choosing where you live, it's important to remember that taxes are only one piece of a much bigger decision making puzzle. And if you want a guide that helps you connect the dots

3:02between your life and your estate plan, check out the death readiness playbook at deathreadiness.com slash playbook. That's deathreadiness.com slash playbook. Now let's get started. Roberta lives in Washington, DC. She owns real estate in more than one place, specifically in the district of Columbia, Maine, and Georgia. She also has family in Kentucky and has considered settling down there. As part of her estate planning, she wants to understand where it makes the most sense for her to have her principal residence or in legal terms where she should be domiciled from an estate tax perspective. Roberta is married and her and her spouses combined net worth are about $10 million. Before you start thinking, I don't have $10 million so this doesn't apply to me. I want to stop you. I don't have $10 million either. This episode isn't just for people with large estates. The goal here is not only to help Roberta

4:03ask the right questions, but also to unpack some of the fear-based assumptions people make about taxes that may or may not apply to their own situation. But before we dive into the laws of the different states, Roberta is considering, we need to take a step back and ask a foundational question. What does it actually mean to be domiciled somewhere? A person's domicile is their principal residence. Okay, but what does principal residence really mean? Can you just buy an inexpensive property in a low-tax state and say that you live there? No, you can't. And here's why. Determining domicile or principal residence is a subjective analysis because it depends on intent. Where do you intend to live on a permanent basis? But that intent has to be supported by objective facts. Courts look at a number of factors to figure this out. I'll link to a change of domicile checklist

5:04in the show notes if you want to go deeper. But some of the big ones include getting a driver's license in the new state, spending at least 183 days there each year and registering to vote. In some cases, state law even defines domicile directly for a state tax purposes. For example, main includes its definition of domicile right in the state tax section of its code. We only get one life. And while I don't think a state tax liability should be the deciding factor in where you live, I do think it's a legitimate consideration. I'm a big believer in living where you love, but I'm also a big believer in understanding the facts and making informed choices. So with that groundwork laid, let's get into Roberta's Tuesday triage question. Way back in episode five, why you shouldn't worry about the state tax, I did a full deep dive on federal estate taxes. I'll link to it in the show notes. In that episode, I break down a topic

6:05that feels overwhelming for a lot of people and explain why for most of us, federal estate taxes don't actually belong on the worry list. For today, I'm going to give you the highlights to Orientus. Let's start with the basics. What is an estate tax? An estate tax is a tax on the transfer of a person's assets at death. It's based on the total value of the estate and it's paid by the estate itself, not by the errors or beneficiaries. More formally, it's a tax on the privilege of transferring property at death. And importantly, estate taxes are paid before assets are distributed to beneficiaries. We'll start with the federal estate tax and then we'll move into what's happening at the state level. The federal estate tax only applies if an estate exceeds a certain exemption amount. For 2026, that exemption is 15 million per person or $30 million for a married couple.

7:06So generally speaking, if you die in 2026 and your estate is below those amounts, your estate will not owe any federal estate tax. There is one important caveat. Taxable gifts you made during your lifetime get added back into the calculation. If you want a deeper explanation of how that works, episode five walks through it in plain English. Based on what Roberta shared, her combined estate is about $10 million. Under current law, that means federal estate tax should not be a concern, unless she's made several million dollars in taxable gifts that I don't know about. The good news is that most of us, including Roberta, do not need to worry about the federal estate tax. Where things get more interesting and more nuanced is at the state level. Roberta asked specifically about several different places. So let's take them one at a time. We'll start with Washington, DC.

8:08It's not technically a state, but it does impose and estate tax. So it absolutely matters here. In 2026, Washington, DC imposes and estate tax on a state's valued at more than $4,988,400. The tax rates start at 11.2% and go up to 16%. So what does that mean for Roberta? Roberta is married, but for purposes of today's analysis, I'm going to assume the entire $10 million estate is in her name alone. That assumption produces the highest possible tax outcome. If instead, Roberta owns $5 million and her spouse owns the other $5 million, the estate tax due at Roberta's death would be significantly lower. If Roberta were to die in Washington, DC in 2026 with a $10 million estate, roughly $5 million of that estate would be above the DC estate tax exception.

9:08Under current law, the total DC estate tax liability in that scenario would be just under $700,000. Now, let's move on to Maine. As of now, Maine has not yet announced its 2026 estate tax exemption amount. There was a bill introduced in April 2025 that would have reduced the exemption to $1 million, but that bill did not move forward. The last time Maine's exemption was that low was between 2006 and 2012. Since then, it has increased steadily. For Decedence Dying in 2025, Maine's estate tax exemption was $7 million. So, for purposes of today's discussion, I'm going to assume the 2026 exemption remains at $7 million. Maine's estate tax rates range from 8% to 12%, depending on the portion of the estate that exceeds that exemption. And here's where Maine becomes more complicated.

10:10Maine doesn't only tax people who are domiciled there. It can also impose a state tax on someone who isn't a Maine resident, but owns property in Maine. If Roberta is a resident of Maine at her death and has a $10 million estate, she would owe approximately $240,000 in Maine estate tax. That tax applies only to the $3 million of her estate that exceeds Maine's assumed $7 million exemption. So, as a Maine resident, Roberta's state estate tax liability would be significantly lower than if she were a resident of Washington, DC, where we estimated the tax at roughly $700,000. But Roberta also owns real estate in Maine. Let's assume she has a vacation home there worth $1 million. Even if Roberta is not a resident of Maine, the state of Maine will automatically place a lien

11:13on any real estate and tangible personal property she owns in Maine. That means not just the house itself, but everything in and around it, furniture, jewelry, a pool table, kayaks, jet skis, that lien can only be released by filing a Maine estate tax return. There is a short form return available for states that are well below the $7 million exemption amount. But even smaller states are still required to file a return. Here's the key rule. For a non-resident deceit, Maine calculates the estate tax as if the person were a Maine resident. And then, pro-rates the tax based on how much of the estate is actually located in Maine. So how does that apply to Roberta? Roberta's total estate is $10 million. Of that, $1 million consists of Maine property, including the real estate and the tangible personal property associated with it.

12:14In other words, Maine property makes up 10% of Roberta's total estate. If Roberta were a Maine resident, her estate tax would be approximately $240,000. Because she is not a Maine resident in this scenario, Maine takes 10% of that amount. That means the Maine estate tax do if Roberta were not a resident of Maine, but owned a $1 million property there would be $24,000. Let's pause and take stock of where Roberta's estate tax liability stands so far. If Roberta dies as a resident of Washington, DC, her estate would owe approximately $700,000 in estate tax. If she dies as a resident of Maine, her estate would owe approximately $240,000 in estate tax. If she dies living somewhere else, but still owns a $1 million property in Maine,

13:14her estate would owe approximately $24,000 in Maine estate tax. The bottom line is this, as long as Roberta owns property in Maine, Maine is going to take a slice of her estate, whether she's domiciled there or not. Now, let's move on to Georgia. Thankfully, Georgia is easy. Georgia is one of 38 states that does not have an estate tax. If Roberta is domiciled in Georgia at her death, Georgia will not impose any estate tax on her estate. And lastly, because Roberta has family in Kentucky and has considered living there, let's take a look at what's going on in Kentucky. Kentucky doesn't have an estate tax, but it does have an inheritance tax. And yes, that's different. So what is an inheritance tax and how does it work? I'll be honest, I kind of wish Kentucky weren't on Roberta's list because inheritance tax is muddy the water.

14:16Only six states still have them. Iowa, Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania, which means most people never have to think about them at all. Unlike in estate tax, an inheritance tax is not a tax on the estate. It's a tax on the person who receives property from the estate. I'm going to simplify this a bit because we don't need to get deep into the weeds. In Kentucky, all property owned by a Kentucky resident is generally subject to the inheritance tax, except for real estate located in another state. And real estate and tangible personal property located in Kentucky and owned by a non-resident is also subject to the inheritance tax. So how does this apply to Roberta? First, let's assume Roberta does establish her principal residence in Kentucky. This is where things can get complicated, not so much for Roberta, but for her beneficiaries. Kentucky divides beneficiaries into three classes,

15:18classes A, B, and C. Class A beneficiaries include a surviving spouse, parents, children, stepchildren, grandchildren, siblings, and half siblings. Class B beneficiaries include more distant relatives like nieces and nephews, aunts and uncles, and great-grandchildren. Here's the good news. Class A beneficiaries are completely exempt from paying Kentucky inheritance tax. And for most people, that's the end of the story. Roberta is married. It's common for married couples to leave everything to a surviving spouse. And if Roberta has children and her spouse pre-deceases her, it would be common for her to leave assets to her children. Because Roberta's spouse and children are class A beneficiaries, they would owe no Kentucky inheritance tax. So even though Kentucky's inheritance tax sounds complicated, it may not apply to Roberta at all, whether she lives in Kentucky or not. But let's change the facts slightly.

16:20Suppose Roberta is a Kentucky resident, and she wants to leave $25,000 to her best friend, Megan. Megan is not a class A beneficiary. She's also not in class B, which covers more distant family members. Megan falls into class C, which includes everyone else. Class C beneficiaries receive a $500 inheritance tax exemption. And the inheritance tax rates range from 6% to 16% depending on the size of the gift. On each $25,000 gift, the inheritance tax owed by Megan would be about $1,800. And that's an important point. Megan pays that tax, not Roberta's a state. Megan would be responsible for paying the inheritance tax within 18 months of Roberta's date of death. So assuming she receives her distribution from the estate within that 18 month period, Megan should be able to pay the inheritance tax with her actual inheritance. So let's look at one more scenario.

17:22Assume Roberta is not a Kentucky resident, but she owns a $500,000 home there that she uses when visiting family. Kentucky's rule is that real estate located in Kentucky is subject to the inheritance tax. But remember, class A beneficiaries are exempt. So if Roberta leaves that Kentucky home to her spouse, parents, children, stepchildren, grandchildren, siblings, or half siblings, no inheritance tax would be due. Suppose Roberta wants her best friend, Megan, who lives in Kentucky to inherit her Kentucky home, which is worth $500,000. Megan is a class C beneficiary, so she is not exempt from paying Kentucky inheritance tax. On a $500,000 inheritance, Megan would owe approximately $76,000 in Kentucky inheritance tax. That's a significant bill. And remember, Megan owes that tax personally. Roberta's a state doesn't pay for it.

18:24If Roberta truly wants Megan to be able to keep the house rather than sell it to pay the tax, Roberta should consider leaving Megan additional cash. That way, even after paying inheritance tax on the cash itself, Megan still has enough liquidity to cover the inheritance tax on the house. Now, let's recap what we've learned. If Roberta dies as a resident of Washington, DC, her estate would owe approximately $700,000 in a state tax. If she dies as a resident of Maine, her estate would owe approximately $240,000 in a state tax. And if she dies as a resident of a state other than Maine, but still owns her $1 million property in Maine, her estate would owe approximately $24,000 in Maine estate tax. If she dies as a resident of Georgia, her estate would owe no estate tax to Georgia. Georgia does not have an estate tax. And if Roberta dies as a resident of a Kentucky,

19:24or owns property in Kentucky, her beneficiaries may owe Kentucky inheritance tax, depending on their relationship to her. Her closest family members, like her spouse, children, grandchildren, parents, and siblings, are exempt from Kentucky inheritance tax, regardless of the value of what they receive from Roberta's estate. But estate and inheritance taxes aren't the only financial considerations that matter. Income taxes, property taxes, sales taxes, and overall cost of living all factor into where it makes sense to live. A full tax and financial analysis is beyond the scope of today's Tuesday triage episode. But it's something Roberta should consider before making any final decisions. And finally, wherever Roberta ends up establishing her domicile, she also needs to think beyond taxes when she owns real property in multiple states. Without planning, her estate could end up going through appropriate not just where she lives, but in every state where she owns real estate. One common way to avoid that

20:24is to transfer real estate into a revocable trust. A revocable trust allows Roberta to maintain full control over her real estate during her lifetime, while avoiding what's known as ancillary probate in each state where the real estate is located. If you want a deeper dive into revocable trusts and how they work, I'll link to episode 19 while you need or don't need a trust in the show notes. Where you live is about so much more than taxes, but taxes are part of the reality. My hope is that today's episode helped you separate fear from facts and gave you a clearer framework for thinking through domicile and multi-state ownership. You only get one life and you deserve to make decisions that align with how you want to live it. Eyes open and fully informed. That's what death readiness is about. If today's episode made you realize how many moving pieces there are in a state planning, you're not alone. The death readiness playbook was created for exactly this moment when you know you need to get organized

21:25but don't know where to start. It helps you inventory what you have, understand what actually matters and prepare for conversations before there's a crisis. You can learn more at deathreadiness.com slash playbook. That's deathreadiness.com slash playbook. Thanks to Roberta for submitting a complicated but important question. If you have a question, you'd like me to answer on a future Tuesday triage episode submitted at deathreadiness.com slash Tuesday triage. That's deathreadiness.com slash Tuesday triage. The link is in the show notes. Thanks for being here today. This is death readiness. Real messy and yours to own. I'm Jill Masteryani and I'm here to help you sort through it, especially when you don't know where to start. Hi, I'm April Jill's daughter. Thanks for listening to the deathreadiness podcast. While my mom is in a tranny, she's not your attorney. The deathreadiness podcast is for educational

22:26and entertainment purposes only. It does not provide legal advice. For legal guidance, tailor sure you need situation, consult a license attorney in North State. To learn more about the services my mom offers, visit deathreadiness.com.