Saying Goodbye Is Never Easy

Have you ever thought about moving your home sweet home to another state? Have you ever talked to your CPA or lawyer about it? A word to the wise: Talk to a professional about applicable tax and legal details involved before you move. State tax authorities in California do not make it easy to say goodbye, with investigators and auditors who are on the lookout for those who move, forcing residents to prove they really have cut ties in favor of less-expensive tax jurisdictions. The more ties you cut, the more likely you will be viewed as having left the state permanently. Important items that provide validation of a move include school records, DMV registrations and driver’s licenses, phone records, home ownership records, pet records, business ownership and office records, a documented change in lifestyle, miscellaneous receipts, and records of family, friends and relatives visiting your new domicile. Proof of relationships with new doctors, lawyers, and other professionals; memberships; bank relationships; shopping receipts; and a new job validate your move too.

A crucial determining factor in determining a person’s potential tax liability goes beyond the rule of thumb—184 days in one location per year (the number of minimum days varies by state). This factor determines the intent as to whether a location is a domicile or a residency. A domicile is a person’s fixed, permanent, and principal home address in which they reside and that they intend to return to and/or remain in (see important items above). While a person can have multiple residences, they can only have one domicile. This distinction is important because an individual may be living in a certain residence for a certain period, but if it is not the place to which they attach themselves and intend to return, it is not their one and only domicile.

These definitions matter because showing domicile in one state isn’t enough to ensure that only that state will tax the household. Instead, domicile merely ensures that the state is a state of residence, while other states may claim the individual is a statutory resident as well, potentially triggering another layer of income taxes. The importance of an individual’s domicile is critical in other matters as well. It impacts not just income taxes but also many legal matters, such as traffic laws, insurance liability, creditor protection, family law, and estate and trust matters.

While establishing as many ties as possible in the new state is critical, cutting ties from the state left behind is equally critical. For the cleanest break possible, it is advisable to sell the existing residence and to buy in the new state as this demonstrates clear intent to re-establish one’s domicile and residency. To defend a challenge from a state authority of one’s change to a new state, a thorough record-keeping system is absolutely critical. And while the ability to establish one’s intent to make a state change is quite necessary, it is advisable to make the move under the guidance of professionals before, during, and after your move to the new location that you will call home sweet home.

MD Wealth Partners, Inc. is a Registered Investment Advisor in Westlake Village California that provides a range of investment retirement planning and estate planning services. The article is a brief overview and is intended to provide information only. Information is not legal or tax advice and you should consult with qualified professionals on related subjects.. The article covers some important considerations associated with moving one’s residence and domicile and is by no means comprehensive. The accuracy of the article content is not guaranteed. The information provided by the author and contained in this article is not a solicitation for professional services or to purchase or sell investments. Investing involves risks and there is always the potential of losing money when you invest. Specific investments may not be suitable for all investors as the appropriateness of a particular investment or strategy will depend on an individual investor’s circumstances and objectives.

MD Wealth Partners, Inc.: A personal wealth enhancement boutique for select clients. mark@mdwealthpartners.com. mdwealthpartners.com.
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