The Sunshine State is one of those popular destinations where people flock to every year for business, a good time, or the tax incentives. Some “snowbirds” choose to stay in Florida some of the time for the warm weather while still maintaining their primary residence in a different state. However, if you live in Florida for at least six months and a day, you can take advantage of some great benefits the state offers for its residents. If you split your time between Florida and another state, you should consider how these circumstances can affect estate planning.
Avoid Probate in Different States
Probate proceedings are often regarded as costly and burdensome for surviving beneficiaries and they can potentially delay the process of transferring the estate’s assets. On top of that, each state has its own legal requirements to determine how the estate must be probated. For estate planning purposes, your domicile determines which state laws govern your estate upon death and how your estate is taxed.
To take advantage of Florida’s probate laws and its other benefits such as no estate taxes, it’s important that your primary domicile be in Florida. While you may live in different states from time to time, only one state can be your domicile–where you reside permanently. To save on some of the hassle, setting up a revocable living trust can be an effective way to avoid probate in multiple states and ensure an easier transfer of assets.
Obtaining Florida Residency
If you spend only a couple months out of the year in Florida you won’t qualify for Florida residency or its benefits. But if you spend significant time in Florida and you are a resident of Maryland, New York, Illinois, Minnesota, Washington, or Oregon (plus a few other states that also have either estate tax or inheritance tax), becoming a Florida resident may be worth considering.
To establish Florida residency you should start by doing the following:
- File a Declaration of Domicile with your local county clerk near your Florida property.
- Obtain a Florida driver’s license and register your vehicle using your new Florida address.
- File your income taxes as a Florida resident and as a non-resident in your former state.
- Maintain strong ties to Florida and the community by living there at least 183 days per year (just over half the year).
Finally, it’s important to have an experienced estate planning attorney review your overall estate plan, including any will, trusts, and powers of attorney, to ensure they are valid under Florida law and reflect your current residency status.
What are the Benefits of Being a Florida Resident?
Florida offers attractive incentives and protections for its residents such as:
- No Estate Tax, State Income Tax, or Inheritance Tax: These tax benefits are a significant draw for many residents who come to Florida for its tax friendly status.
- Homestead Exemptions: Florida residents can reduce their property’s taxable value by up to $50,000 if they own and reside in the home or it serves as their dependents’ permanent residence. However, you may lose this benefit and become ineligible if you rent the property for more than 30 days per year for two consecutive years.
- Property Tax Cap: The assessed value of a homestead property can increase by no more than 3% annually or the Consumer Price Index (whichever is lower).
- Creditor Protection: Florida’s homestead exemption protects your primary residence from most creditor claims, even in the event of a lawsuit.
- Inheritance Rights: Florida law provides strong protections for the inheritance rights of surviving spouses and children, which may differ significantly from other states’ laws.
Conclusion
For part-time Florida residents, estate planning requires careful consideration of your residency status. By establishing Florida as your domicile and updating your estate plan to be valid under Florida law, you can maximize the benefit of the state’s tax and legal advantages, and ensure a smooth transition of your assets to your loved ones. Consulting with an experienced estate planning attorney is a must in order to guide you through the process and tailor a plan that meets your unique circumstances. Contact one of our Trust & Estate lawyers here.
