Quality of life issues include your proximity to family and friends, familiarity with where all your resources are, access to mass transportation hubs for those who enjoy travel, culture, and climate are just a few things that have a direct effect on your level of satisfaction and enjoyment of life. Moving may leave you feeling isolated and uncertain after years of confidently navigating life from your current address.
Availability of state-of-the-art medical care is not something to be taken for granted. If you currently live in an area where major teaching hospitals are essentially in your backyard and you are moving to a more remote location, you may find yourself regretting your decision, especially as you get older and the infirmities of age start to appear.
Different areas of the country have different vulnerabilities to hurricanes, earthquakes and other types of disasters. If you are moving to an area that has a higher risk for any type of weather or naturally-caused damage it makes sense to investigate what your homeowners’ insurance costs are going to be – as well as to think about whether you are really willing to put yourself in the path of nature’s wrath.
THE TAXES WORTH CONSIDERING If you’ve already included the non-tax considerations listed above and you are still intent on making a move, then it is time to understand what doing so will mean to your economic picture. It’s a good idea to sit down and discuss your plans with your financial advisors long before putting your home up for sale, as you may have second thoughts after thinking about all of the consequences of a move. Among your considerations are:
There may be more to a state’s taxes then what you are thinking about. States require tax revenue to provide for public services, so though you may think you are considering a no-tax state, there is really no such thing. If they’re not taxing income, they are taxing something else.
If you receive income from a trust you will need to look into exactly how it is taxed at the state level in the state you’re thinking about relocating to. Every state has its own strategy, and you may not be happy with what you learn.
If your goal is to gain tax benefits rather than to actually move, you might want to consider taking advantage of friendlier tax laws such as those in Delaware or Nevada. You may be able to relocate your assets in a way that limits taxes and offers confidentiality and creditor protection while staying put where you are. This may or may not be possible depending upon your particular situation, but it may be worth exploring.
If your compensation scheme includes deferred bonuses or salaries that will be paid out during your retirement, it is important to find out how the state you are considering relocating to treats deferred compensation, and how your specific pay will be treated.
MADE UP YOUR MIND? HERE ARE YOUR NEXT STEPS. Like everything else in life, relocating to another state and making it your primary residence is not as easy as just deciding to do it. There are essential steps that need to be followed in order to reap the tax rewards that you are seeking. Here are just a few of those steps: it is important that you do your due diligence to make sure that you have complied with everything required of your new home.
Change your vehicle registration to your new address
Apply for a driver’s license for your new address
Register to vote from your new address
Find out whether your state requires a “Declaration of Domicile” or similar document, and if so, apply for it and file it
File your federal tax returns from the new address
Obtain property and casualty insurance at the new address
File state taxes as a new resident, as well as former state tax returns as a non-resident if you earn any income in that state
Adjust all banking records, legal documents, and credit card records to reflect your new address
Move your belongings to your new address
Change the address on your passport
Get established with community, professional, religious and social networks associated with the new address
Establish relationships with medical providers proximal to the new address
Host family and friends at the new address
Getting established in a new community is a challenge, but it is an important step to ensure that you will be able to prove your state residency and get the tax advantages you seek. Include contacting our office on your to-do list to make sure that you have addressed everything as needed and reviewed and updated your estate plan as well. You may also need to address the particulars of where some of your family members live and go to school to make sure that all of the legal and tax requirements have been met.
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