Story written by Kelli B. Grant and Katie Young at CNBC
If you’re a would-be snowbird, it pays to do some financial planning before you take flight.
By age 61, the majority of people say they are free to choose where they most want to live, according to a 2014 study from Merrill Lynch. Earlier in life, most people say life responsibilities such as family or work dictate where they dwell.
So it’s not surprising to see retirees move, at least part time, to a dream locale. More than a third of retirees told Merrill Lynch that they have already moved, and another 27 percent anticipated doing so. (See charts below for details on who is staying put, and where snowbirds are moving.)
Before you start splitting time between two or more states, consider which you want to be your primary place of residence, or domicile, said lawyer John J. Scroggin, an accredited estate planner and partner with Roswell, Georgia-based law firm Scroggin & Co. You can have multiple residences, but only one domicile.
There can be numerous advantages to picking one place over another, he said — several states have no income tax, and others have tax breaks on retirement income and on real estate taxes for older residents. Estate taxes can also be more favorable in some states than in others.
Then, be prepared to prove that the state you pick really is your home base.
“Some states are renowned for going after people who say they are [now] residents in other states,” Scroggin said. “How do you marshal the facts?”
Each state has its own requirements to prove residency, so check the details. For starters, make sure you change your driver’s license, mailing address and tax return address.
“One big mistake people make is they have their income tax return go to the wrong state,” Scroggin said. “The federal government and the states share that data.”
Check to make sure that all your financial and estate-planning documents — including powers of attorney, wills and medical directives — are all still valid under the laws of your new state, he said. You may also have to amend auto insurance policies to make sure you’re adequately covered in both locales.
Becoming a snowbird can be a big move, so give it a test run first. Scroggin said many of his clients find they miss their families and friends too much to spend the bulk of their time in that once-dream locale.
“Don’t go buy a place right away,” he said. “Go down and rent for a few months and see how you really adjust.”
Posted by: The Trust Advisor