Now that winter has officially arrived and many people travel south, folks may wonder how to change their state of residency and how to prove that they live in a different state. Given that Minnesota has some of the highest state income tax and estate taxes in the nation, it’s obvious why many people are serious about moving to another state.
Note that changing residency should NOT be a purely financial decision. You should consider your lifestyle goals and personal commitments when evaluating your options. There is a laundry list of factors to consider when moving, the most important being that you spend at least six months living in your home state, but also several, often, overlooked changes you would be expected to make. All these factors do not have to be met; however, you must establish an overarching fact pattern to prove that Minnesota is no longer the state you call home. If you do decide to move out of state, you should consider how it will impact your financial plan.
Minnesota Guidelines for Establishing Residency
Often, the new home in a warmer climate is entirely paid for by the tax savings of the move itself. We can quantify the savings with our financial planning tool, WealthNAV. Below is an example of one of our client’s who recently decided to make the move to Florida. The blue bar graph is a depiction of their nest egg if they resided in MN. The green is how their wealth could be impacted by the elimination of state income taxes. The savings is $15,000 per year, enough to pay the costs of buying and maintaining a more expensive home in the new state. Overtime, the income tax savings can exceed over $1 million.
Another important consideration is deciding which state you want your legacy to be taxed in. Minnesota has significant estate taxes on your net worth if it exceeds $3 million per person, $6 million if married. Planning now allows you to maximize your legacy and direct more of your dollars to the people you care about.
If you’d like help evaluating your options, contact a Boulay wealth management advisor today.
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