As retirement approaches, your mind may start wandering off to a warm beach, an isolated lake surrounded by wilderness, or downsizing to a small condominium and moving to be close to your children. The majority of people who reach the age of 61 say that they feel free to choose where they want to live, according to a Merrill Lynch study and CNBC.
While family and work obligations keep most people put once they reach early adulthood, at least in terms of the state they live in, retirement opens the doors to 49 other states. However, whether you want to retire to Alaska or Florida, or move to or stay put in Maryland, there are some important questions that you need to ask yourself regarding estate planning. Snowbirds or retirees who want to move to a new state altogether must consider the implications of the following:
- Income tax;
- Estate tax in each state;
- Real estate tax in each state;
- Tax breaks in each state;
- Cost of living in each state; and
- More.
Pick One State and Prove That is Your Domicile
Because you cannot reap the benefits of tax advantages from State A while picking and choosing from the benefits that State B also has to offer that State A lacks, you must prove that one state versus the other is your domicile. You cannot vote in two states, just as you cannot have an estate plan that takes advantage of tax savings in two states. While it is of course perfectly legal to own property in multiple states, you can have just one “domicile.” A domicile is the state
in which an individual’s permanent home is located. You need to be able to prove that your domicile resides in this state—the state that offers the best tax savings and the most estate planning advantages in general. Changing your driver’s license, tax return address, and library card may not be enough, so it is best to check with the state’s specific requirements for becoming a resident. Some states require a waiting period before residency can be solidified. In order to be a full resident of Maryland, according to the Comptroller of Maryland, you must fulfill one of the following residency obligations:
- Have a permanent home in Maryland; or
- Have a permanent home outside of Maryland but maintain a place of abode in Maryland for more than six months of the tax year.
Call Maryland Estate Planning Attorney Tara K. Frame
The Merrill Lynch survey found that one third of retirees plan to move by the age of 61, and over one quarter had already made that move. The South Atlantic region, which includes Maryland and runs north-south from Maryland and West Virginia down to Florida, is the most desirable region to retire to, and the least likely region where people want to leave once they do retire. Do you plan on moving to Maryland to retire? Do you plan on moving part-time to another state and keeping an abode in Maryland? Do you want to make another state your domicile? If you answered any of these questions in the affirmative, the Pasadena attorneys of Frame & Frame are here to answer your questions about estate planning today at 410-255-0373.
Resources:
taxes.marylandtaxes.gov/Individual_Taxes/Individual_Tax_Types/Income_Tax/Filing_Information/Determine_Residency_Status/
cnbc.com/2017/09/13/a-financial-flight-plan-for-snowbirds.html