Whether relocating from a high-income tax state to a low-income tax state or moving to another state with increased asset protection, property owners, especially those of high net-worth, should consider certain factors for establishing domicile.
Many residents of Minnesota love to move to Florida. They love the warm weather during the long winter, the ocean, the beaches and also the tax advantages. Minnesota is a high-income tax state. One of the highest. Florida as no state income taxes.
Changing your domicile requires actions demonstrating that you plan to abandon your prior domicile and establish a new domicile with the intent to remain indefinitely.
Moving to another state can be a lot of work, time and coordination. Not the least in which involves thinking and dealing with establishing your new home as your legal residence.
First and foremost, become familiar with your new state’s law presumptions regarding residency. For example, if you move to Florida you need to spend six months and one day living in Florida each year to be considered a resident. Documenting evidence is key in proving your domicile change.
Consider taking the following steps to make things official:
- Begin using the mailing address of your new domicile.
- Forward your mail to your new address.
- Use your new address for bills, insurance, Social Security and all legal documents.
- Obtain a new driver’s license in your new home state and cancel your license in your former state of domicile.
- Title and register automobiles, boats, and recreational vehicles in your new state of domicile.
- Register to vote in your new state of domicile and cancel your voter registration in your old state of domicile.
- Follow this guide for income tax filing:
- Use your new address as your residence on federal and state income tax returns.
- File nonresident or part-year resident income tax returns in states other than your new state of domicile using your new address.
- Establish memberships in civic, religious, community and similar affiliations in your new state. If you would like to maintain membership in your old domicile, be sure to classify yourself as a non-resident member.
- Establish relationships with the primary professional and health providers in your new domicile as well.
- Consider selling the real estate in your old state of domicile.
- Move tangible personal property from the home in your old domicile and furnish your new domicile.
If you plan to maintain a residence outside the state, you have several options to help you prove your new domicile:
- Transfer the title of the residence to any business entity you have established in your new domicile, and lease the residence from the business.
- Retitle the residence in the name of a trust administered in your new domicile.
- Apply for a homestead exemption in your new domicile and remove the exemption for any residence you maintain in your old state of domicile.
These miscellaneous action steps will serve as further proof that you have changed your state of domicile:
- Keep contemporaneous records of every day you spend in both the old and new domiciles. Save anything that can serve as proof: airline tickets, paper receipts for purchases, bills for cell phone usage, etc.
- Spend more days in your new domicile than in the former state.
- File a declaration of domicile, which is sworn statement of permanent residency in your new domicile.
- Sign estate planning documents in your new state of domicile that declare your new domicile.
Bottom line is to live where you want to live but to take full advantage of any tax advantages. Also you want to make sure you document and make the necessary changes to prove your updated domicile.
Any opinions are those of Nicole Middendorf and not necessarily those of Raymond James. This material is being provided for the information purposes only and is not a complete description, not is it a recommendation. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete.