Moving to another state can create estate planning benefits

People often move to another state after they retire. In the past, this was usually to take advantage of a better climate or to be closer to friends and family. But these days, moving is often a good form of estate planning.

One reason is state estate taxes. These used to be tied closely into the federal estate tax system and largely a non-issue. But for several years now state estate taxes have been “uncoupled” from the federal system. States now vary widely in their tax rates and exemptions, and moving to another state can often significantly affect how much of your assets will be left for your heirs.

Another reason is Medicaid. Recent changes in the law have resulted in different states having different rules for eligibility, and different benefits and costs for people who are eligible.

You might think it’s easy to tell when you’ve moved to another state. But there are a growing number of cases where the government has challenged which state a person’s legal residence really is.

This typically happens when a couple buys a home in another state, but also keeps their home in their original state, and spends a lot of time visiting their original state. This allows the government to argue that while they may have bought a house in another state, they never really “moved.”

If you’re in this situation, here are some things you can do to make it clear that you really are a resident of your new state:

Register to vote in the new state, and have your name removed from the voting rolls in the old state.

Change your state of residence on your passport, deeds, leases, and credit cards.

  • Tell the Social Security Administration that you have moved.
  • Execute a new will stating that you are a resident of the new state.
  • Register your car in the new state.
  • Obtain a driver’s license in the new state, and surrender your old license.
  • Use a bank in the new state.
  • Empty safe deposit boxes in the old state and move the contents to the new state.
  • See a doctor in the new state and have your medical records sent there.
  • File federal income tax returns using your address in the new state and mail them to the appropriate IRS office for that state. If you must file tax returns with your old state, file as a non-resident.

Another good idea is to keep a calendar showing when you were in the new state, so you can prove that you spent the bulk of your time there.

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