Effective Planning to Officially Become a Florida Resident

Harold and Wilma recently left their home state of New York to retire early in the state of Florida. They spent the last two weeks making numerous appointments with doctors, lawyers, accountants, financial advisors, and various local government offices to get their affairs in order. The past few weeks may be a bit of a blur as all of this was done while familiarizing themselves with local restaurants and making new friends. In addition, Harold and Wilma just learned that their oldest daughter will be delivering their first grandchild soon, back home in New York. Situations like my clients, Harold and Wilma, are becoming more common as the winters become colder and longer, and many states find themselves attempting to make up budget deficits with new tax proposals intended to significantly increase both income and estate taxes for residents.

The time that Harold and Wilma spent getting their affairs in order was time well spent as it will protect them in the event New York later tries to argue that they never gave up their residence. As many individuals continue to leave high tax jurisdictions for bright, sunny, and income tax free Florida, more states are starting to audit income tax returns and challenge domicile and residence. These audits can be costly, especially if the timing of the move coincides with a significant taxable event, such as an exercise of stock options, a sale of significant securities or investments, or the sale of a business. For an individual to be successful if challenged by a state, proper planning must be done to ensure the timing and documentation of the change in residency and domicile coincides with the physical move south.

For many states, domicile is a key consideration in determining one’s residency status for tax purposes. Domicile is all about intent. Does the taxpayer intend to make Florida their permanent home? Is it where they intend to return after temporary absences? Domicile generally changes once a taxpayer demonstrates specific intent to abandon the old domicile and to acquire a specific new domicile, and the taxpayer is physically present in the new domicile.

We generally recommend that an individual moving to Florida take the following actions to substantiate their change in residency and domicile:

1.   Transfer state drivers’ licenses or state identification cards to Florida
2.   Transfer car registration, title, insurance, and license plates to Florida
3.   Transfer voter registration to Florida, and vote in upcoming elections
4.   Bank and investment accounts should be updated with a Florida Address
5.   File a formal declaration of domicile with the clerk of circuit court’s office in the county where Florida property is owned
6.   Near and dear items: treasured artwork, family heirlooms and pictures should be located in their Florida residence
7.   Estate planning documents such as wills and trusts and other legal documents should be updated listing Florida as the location of domicile.
8.   Safety deposit boxes should be moved to a Florida location
9.   Pets should be physically moved to Florida, and they should visit a local veterinary office
10.   Local charities in Florida should be supported
11.   Florida country clubs should be joined
12.   Accountants, attorneys, and advisors should be used that are in Florida

In addition to establishing domicile in Florida, an individual should also be sure that they will not meet the definition of a resident under another state’s laws, which typically depends on the number of days spent in the other state. For many states, spending 183 days (6 months) or more in that state would create residency in that state (even if domicile is not met), but the test can be as high as 274 days (or 9 months) depending on the state. Some states also require a permanent abode in the state in addition to the day count. We generally recommend that an individual who is changing their residence to Florida spend at least 183 days in Florida in the initial year of the change in residency and domicile. In subsequent years they should avoid spending 183 days or more in any other state.

Clear and precise documentation is important as states can be very aggressive when challenging residency and/or domicile.  States are known to request phone records in addition to bank and credit card statements, pull tolls, including interviewing both doormen and neighbors to determine if and how long an individual was present in their state.

Individuals looking to make a permanent move to Florida should take the time necessary to understand the domicile and residency requirements applicable to their specific situation. While the documentation required to be successful in transferring domicile and residency to Florida can be tedious and time consuming, failure to maintain proper documentation and keep accurate records of travel days can prove to be extremely costly.