Making Cents: From Snowbird to Flamingo
By: John P. Napolitano, CFP®, CPA, PFS, MST
Each year about this time people wonder if they should make their winter haven their primary residence. Most realize that certain states such as Florida have no income or death taxes, which is very appealing to most people with assets and/or income. But to qualify as a resident of another state, you may have to pass a presence, as well as a smell test when challenged by tax regulators.
The presence test is often misinterpreted, but it is fair to say that if you are physically in that new state for greater than ½ of the year, that your residency is obvious. Most of us, however, travel for work or to visit friends and family, and that out of state travel is what may muddy the waters. To minimize your risk of challenge by tax authorities, consider some of these actions. Don’t get cute here, make sure you spend as much time as possible in the new state.
Let’s use Florida for example. Execute a Declaration of Domicile and a Declaration of Homestead and file it in the records office in the county where your new residence is located. You should also change your voter registration to Florida as well as the registrations of any automobiles or boats. Also obtain your Florida driver’s license and change all of your insurance as soon as you set foot in the state.
Use your Florida address in all documents and records. File this year’s tax return with Florida as your state of residence and send it to the address for FL residents which is likely different than it was in your former state.
When traveling, use the Florida address as your residence to register at hotels, motels, or your favorite rental site. This may mean logging on any sites you frequently use, from credit cards through airlines and change your address to your new state’s address. You should also change the address for all of your credit card accounts and most of your banking and safety deposit box accounts to FL. It is OK to maintain bank and safety deposit boxes in your former state, but accessing them too much could give rise to a domicile challenge. Also, any valuable assets left in safety deposit boxes would be considered property owned by you in that state and subjected to income and estate taxes.
If you are a member of local clubs or organizations, consider resigning or looking for an out of state level membership. Consider renewing similar memberships in the new state. If you belong to national organizations, revise your membership to be reflected as a resident of your new state.
If you are still working, transact business from the new state if possible. That may mean setting up an office in home or a separate phone line dedicated to business.
Revise your estate plan to be executed and effective in the new state. Wills, trusts and other declarative documents like a health care power of attorney need to be revised to work in your new state anyway.
This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor. US Wealth Management, US Financial Advisors and LPL Financial do not provide tax and/or legal advice or services.
John P. Napolitano CFP®, CPA is CEO of U. S. Wealth Management in Braintree, MA. Visit JohnPNapolitano on LinkedIn or uswealthnapolitano.com. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. John Napolitano is a registered principal with and securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through US Financial Advisors, a Registered Investment Advisor. US Financial Advisors and US Wealth Management are separate entities from LPL Financial. He can be reached at 781-849-9200.