The Great Move – Changing Your Personal State Residence

The only thing constant is change…attitudes, health, obligations, opportunities and where you just wish to hang your hat. The “Great Migration” for high income earners or residents of states with high property tax rates is well underway. Yet, it may be just an important afterthought in residency change decisions.

The law may disagree with your interpretation of domicile and residency. Where you maintain your home, or your place of abode is your residence. What if you own homes in multiple states? You can owe income taxes in multiple states. Domicile requires physical presence with your intention to permanently remain or to return after a temporary absence. Domicile is a matter of intent. You can remain domiciled in a state even after you have physically left if you have not demonstrated an intention to permanently live somewhere else.

Each state’s statutes provide their own definition of residence for tax purposes which may vary considerably. Simply buying a home in another state may appear simple. There is no clear test guaranteeing a taxpayer will pay taxes as resident of their “new home” state. Evaluating residency changes are based on a taxpayer’s specific facts, and circumstances. There are other considerations. These factors may be determined to include the ever-important physical presence in a state, who owns the home, family location, or financial and employment interests.

Are you or are you not a resident of your former state? The longer you can show intent, the greater you can prove you severed your former residence ties. To help you begin, review these suggested tasks:

• Talk with your advisers before transferring or selling any real estate in the former state
• Rent or buy a residence in your new state

• Claim a homestead exemption in your new state (if applicable), and relinquish any homestead claim in your old state

• Stay away from your former state for more than 183 days (half a year) and be certain 183 days away is still current
• Direct social, economic and other activities towards your new state
• Start early and obtain the required paperwork prior to enrolling your children in the new state’s private or public school
• Direct all financially related, federal tax returns, and correspondence to your new address
• Change all bank accounts to your new state. Close old accounts. Rent a safety deposit box.
• Change your Driver’s license, vehicle registration, and update your insurance. You can’t live in one state and have insurance in another.
• Make new philanthropic contributions to your new local organizations
• Estate planning documents (for example: executors, wills, trust agreement(s), power of attorney, heath care directives)should be reviewed, prepared, and conformed, and in accordance with your new state’s laws upon changing domicile.
• Transfer your medical records to your new local medical providers’ offices
• Terminate your former state’s voter registration; register in your new state and vote
• Obtain your new library card
• Consider changing your religious, social, and service club affiliations. Volunteer in your new home state
• Working remotely? Notify your employer of your move to update your state tax withholding

State residency requirements may change. It’s wise to seek professional advice from your financial advisor, attorney, tax, and insurance professionals who understand your new state’s laws. Let them assist you to proactively document your intent.

States have increased their budgets, frequency, and detail of their residency audit efforts. Former states may not be so willing to wave you goodbye. Sophisticated auditors are requesting more detailed documents to support residency changes and are most suspicious of high-income taxpayers who change residence for the primary aim of saving income taxes. *Christine Kolm shared, “if the number of days a taxpayer spends in a particular state is part of the determinative process, auditors can request the following records:

• Calendars and diaries
• Statements from neighbors, friends, and acquaintances
• Credit card statements and receipts
• Bank records, including ATM receipts
• Freeway fast-lane pass and toll road charges
• Records of airline frequent flyer miles
• Telephone records
• Employment records
• Location of treasured individual property

Regardless of your transitional motivation, changing your home, whether originated by you or requested of you, will impact you uniquely. Who else should you consider? The psychology of transplanting to a new city can be either a thrilling adventure or an intimidating change. This transition includes a customized package of rolling personal emotions. Be patient. Be prepared. Give yourself plenty of lead time. Give yourself the luxury to enjoy this fresh step forward, allow for your own personal or professional creativity, greet new relationships, and upgrade opportunities. Put out your freshly new welcome mat designed to open doors for a successful, social, exciting overall quality of life.

*Changing State of Residence by Christine Kolm, UBS Senior Wealth Strategist, publication of the UBS Advanced Planning Group