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If a trust is created in one state, but the beneficiaries live in another state and the couple who originally created the trust move to a third state, is the trust still valid?
In summary, the general answer is yes. Trusts are governed by the laws of the state where they are established, but as reported in nj.com, “Is a trust valid in all states?” they are valid in all fifty states. The beneficiaries of the trust can move, the trustees can move and the trust is still good.
If there were to be litigation, that would take place in the state identified in the trust.
Your estate planning attorney will have included a clause along the lines of “Governing law: This agreement and the trusts established hereunder shall be governed by the laws of the State of Florida.”
Likewise, the trust will be taxed pursuant to the laws of the governing state.
Most trusts won’t wind up in a legal fight over their terms or the trustee’s actions, and the trustees are rarely required to appear in court in the home state.
There are some exceptions, such as in the event of a death of the trustee, the trustee resigns, or for whatever reason stops acting as the trustee, and there’s no successor trustee named in the trust agreement. In those situations, a legal action needs to be brought in the home state for the appointment of a successor trustee.
If, for any reason, there was a need to amend the terms of the trust agreement after the trust maker’s incapacity or death, then such a proceeding would need to be initiated in the state governing the trust agreement.
An estate planning attorney may discuss including an option where the person establishing the trust may add a clause that stipulates that the trustee is authorized to apply to transfer the trust to another estate, if the trustee is the one who relocates and, if in the trustee’s (or the attorney’s) opinion, the laws of the new state are more beneficial for the purpose of the trust.
If you or your trust beneficiaries are considering relocating, make sure that you review the rules and possible repercussions of any moves with a knowledgeable estate planning attorney.
Reference: nj.com (May 19, 2017) “Is a trust valid in all states?”