Intro music (
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Theresa Marx (
00:10
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Hello and welcome to another episode of Wealth Planning Illuminated. I’m your host, Theresa Marx, a senior wealth strategist at CIBC Private Wealth in the U.S. I am joined today by my colleague Caroline McKay, also a senior wealth strategist at CIBC Private Wealth. In today’s episode, Caroline and I will explore how someone moving to a new state, particularly someone moving for tax reasons, may be able to effectively establish their new tax home. This is part one and our two-part series focused on residency considerations. Alright, let’s get started.
Theresa Marx (
00:50
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It seems like a lot of people are talking about moving lately, you know, whether it’s for a new job or because you know, they want to be closer to family, they’re tired of the climate wherever they are, trying to find something better, and that those situations seem to be a little bit easy. When tax planning’s involved, when somebody’s moving from maybe a high tax jurisdiction to a lower tax jurisdiction, it can get a little trickier because maybe that higher tax jurisdiction doesn’t want to let them go. Right? So, what should we be thinking about when somebody’s moving and trying and, and maybe it’s not the full, sole motivating factor, but when tax is a consideration, what should we be thinking about?
Caroline McKay (
01:29
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So, it’s easy to want to move to a new climate for weather and to be closer to family, but certainly the tax ramifications also can be a driving factor because why do you want to pay more taxes, right? When you can potentially live somewhere that you want to live that has a lower tax burden. The main thing that we think about when we first start talking to people about potentially creating new residences or moving is thinking about this idea of residency versus domicile. Okay? So, residency is a place you reside, and you can have multiple residencies. So, you may reside in Massachusetts and Florida, right? So, residency isn’t just one place, okay? The idea of domicile though, domicile is the place that you think of as your permanent residence with no intention to live anywhere else. And that’s what the states are looking at, okay? Especially from an estate tax and gift tax perspective of where is your domicile, not just where is a residency, because to your point, if they can prove that you still think about or consider yourself as permanently still residing in that , even if you say your residence is in Florida, but your life and certain factors indicate that you really permanently reside in Massachusetts, then Massachusetts is going to make a claim for you from not just income tax perspective, but for gift and estate tax perspective.
Theresa Marx (
02:47
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So, it’s not as easy as just finding a new house and having maybe a second home—
Caroline McKay (
02:51
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Right. Or doing the 183 days that a lot of people will throw out there and say, as long as I spend one day more, right? You are in one state more than the other, I’ve established my domicile. Domicile is a little bit more intricate. There are more factors to that than just establishing where you’re filing your resident tax return for income tax purposes versus a non-resident return.
Theresa Marx (
03:13
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So, you mentioned factors, right? So, what are some of the factors, as we’re trying to figure out, you know, that you mentioned intent, do you intend to stay? So how do we show that we’ve moved to a new place and it’s truly our intent to stay there and call that home?
Caroline McKay (
03:28
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Well, I mean there’s so many things that go into the factors or circumstances, but think about like again, when you say you’ve moved to Florida from Massachusetts, did you purchase a new home that’s commensurate or similar to the home you had in Massachusetts? Or are you renting a thousand square foot condo and you have a 5,000 square foot home back in Massachusetts? Right? So, it can be sometimes even your residencies. What are the comparisons or differences between them? Where is your driver’s license? Where are you voting? Right? Where are your clubs? Where does your family come to visit you? Where do you go to see your doctors? Those would all factor into, you know, where you think of just from facts and circumstances of your true home being, right? So, it’s easy to say, oh, I’ve moved to Florida, here’s my new mailing address to one institution. But really it needs to be more robust than that to prove that you really have picked up your life and now consider one state to be your true home versus another. It doesn’t mean you can’t still visit the other state that you can’t spend a decent amount of time in the other state, but we need all the factors and all the kind of items in your life to support the idea that you’ve moved your residence and you really consider the new place to be your home.
Theresa Marx (
04:43
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I often think of it as like that balancing scale. And if you’re comparing, as you’ve said, Massachusetts and Florida, what goes on the Massachusetts side, what goes on the Florida side and what weighs more, right? I mean, it might be that you’ve got a thousand square foot apartment, but maybe everything else is there is in Florida, so that 5,000 square foot might not, might, might tip you back to Massachusetts.
Caroline McKay (
05:04
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Right, absolutely. And again, that’s where it’s important to go through all the items with advisors, to think about, have I done enough. And some of the things that we suggest people do when they do move their residency and they want to establish domicile, some states will allow you to actually file like a declaration of domicile. That’s great if it’s offered, but it’s moving your addresses, right? Like have all your financial institutions send if you’re still getting mail, right? Or at least put your primary residence as a new place. Start voting in the new place. Change your registrations on your car, get licenses, move your doctors. And again, it doesn’t mean you can’t ever see an old doctor or a specialist in another state, but really try to do everything that is possible to indicate that this is my now true home and update your estate planning documents. With the laws of the state that you believe that you live in, and you want that law to apply when you pass away. So, it’s a lot of paperwork, right? It’s a lot of administration. A lot of this isn’t hard, but it does go to intent. And again, I’m using Massachusetts because I happen to have lived and be associated with Massachusetts. A lot of these states that do have higher tax burdens, both income tax and gift and estate tax, they want to try to lay claim to people because they don’t want to lose that tax base. So, let’s not make it easy for them and, and make these changes to prove, you know, where your new domicile is. And we live in such a virtual world now that we don’t think of our address as meaning as much as it used to. But again, it’s an easy way to indicate if someone did have to send you something in the mail, you know, to, to indicate which state it should go to.
Theresa Marx (
06:47
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Checking all those boxes at the end of the day, making sure that what’s on the side of your new state truly weighs more—
Caroline McKay (
06:53
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Yes. Love the idea of a scale. Absolutely.
Theresa Marx (
06:55
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Weighs more than the other state.
Caroline McKay (
06:56
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You got it.
Theresa Marx (
06:57
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Thank you for joining us for this episode of Wealth Planning Eliminated. We hope you found this topic interesting and that you will continue to explore the variety of wealth planning topics available to you on this channel. Thank you and have a great day.
Disclaimer (
07:11
):
CIBC, private Wealth Management includes CIBC National Trust Company, CIBC Delaware Trust Company, CIBC Private Wealth Advisors Incorporated, all of which are wholly owned subsidiaries CIBC Private Wealth Group, LLC., and the private banking division of CIBC Bank USA. All of these entities are wholly owned subsidiaries of Canadian Imperial Bank of Commerce. This document is intended for informational purposes only and that the material presented should not be construed as an offer or recommendation to buy or sell. Any security concepts expressed are current as of the date of this publication only may change without notice. Such concepts are the opinions of our investment professionals, many of whom are chartered financial analysts. Charter holders, which Certified Financial Planner professionals, certified Financial Planner Board of Standards Incorporated owns the certification Marks CFP and Certified Financial Planner in the U.S. There is no guarantee that these views will come to pass. Past performance does not guarantee future comparable results. The tax information contained herein is general and for informational purposes only. CIBC Private Wealth Management does not provide legal or tax advice and the information contained herein should only be used in consultation with your legal, accounting and tax advisors to the extent that information contained herein is derived from third party sources. Although we believe the sources to be reliable, we cannot guarantee their accuracy. The CIBC logo with a registered trademark or CIBC used under license investment products are not FDIC in insured may lose value and are not bank guaranteed.
