In Florida, you can avoid property taxes at the state level, but you must follow the rules
Migration to Florida has increased in the wake of the pandemic, especially as executives and retirees have become more comfortable with technology and working remotely. When they realize you can avoid the cold while avoiding higher taxes, the appeal grows. New residents can realize significant tax savings now and in the future if they plan for it. For example, the state of Florida has not imposed estate tax at the state level since 2004. This is in stark contrast to many other states that impose their own level of estate tax, which is in addition to the federal estate tax. If you’ve moved to Florida from another state and want to eliminate (or reduce) estate tax at the state level from the previous state, you need to make sure not only that you are domiciled in Florida, but that you have relinquished your domicile in the State of your previous residence.
Florida law provides that a person’s “home” is where they have established a residence with the current intention of making it their permanent home. Florida law further provides that a person’s domicile is determined by intention, as provided by contemporary expression of intention, and overt positive acts proving intention. The following is a list of suggested steps you can take to ensure that you will be considered resident in Florida:
- Homestead exemption. If you own your home, you must apply for the Florida homestead exemption in the county in which you reside.
- Declaration of domicile. As soon as you have physically moved to Florida, you must file a legal domicile declaration form.
- Commercial interests. Since you are actively involved in running a business, you should consider focusing the administrative and financial aspects of the business in Florida.
- As long as you belong to clubs or organizations outside of the state, you must ensure that your membership status is changed to that of a non-resident. Additionally, you need to join various organizations within the state of Florida.
- Charitable donations. To the extent that you make charitable contributions to national non-state charities, these contributions should in the future go to local branches in Florida. Additionally, you should consider making contributions to local charities in the vicinity of your Florida home.
- As soon as possible, you should register to vote in Florida, even if by mail.
- Income statements. All personal tax returns must be filed from your Florida address. In addition, you must declare and pay as a resident all applicable national and local taxes. You must also file a “final” state income tax return in your former state of residence.
- Automobile driving license. You must apply for and obtain a Florida driver’s license.
- Vehicle registration. You should get Florida license plates and car registrations for all of your vehicles.
- Your Florida residence should be used in records kept by:
- Life insurance and other insurance companies.
- Social security administration.
- Companies issuing securities that you own.
- Department stores and other retailers.
- Credit card companies.
- Partnerships or organizations of which you are a member.
- Invoice accounts. Whenever possible, you should establish payment accounts with local merchants or national chain branches in the state of Florida.
- Agreements and other legal documents. Going forward, all agreements to which you are a party and any other legal documents must state that you are a resident of Florida.
- The address in a current passport should be changed to reflect your Florida residence. If you are applying for a passport in the future, you must use your Florida address.
- Bank and brokerage accounts. You should consider establishing personal and business banking relationships in Florida and paying your personal bills through a Florida bank account. Additionally, you should open a safe in Florida and close your out-of-state safe.
- Will and living trust. When drafting your will or codicil and revocable (living) trust, you must state in the deed that you are a resident of Florida.
Finally, it should also be noted that many states tax deceased non-residents on real property or tangible personal property that the deceased owns in the non-resident state. Therefore, if you are domiciled in Florida and own real estate or tangible personal property in another state, it may be to your advantage to restructure the ownership of your out-of-state property to avoid any state-level death taxes on this property. For example, if you are domiciled in Florida and own real estate in Massachusetts, it would be beneficial to transfer the Massachusetts real estate to a multi-member limited liability company. The effect of this transfer is to change the form of the asset from real estate (a taxable asset in Massachusetts) to intangible personal property (a non-taxable asset in Massachusetts).
In conclusion, since the state of Florida does not impose estate tax at the state level, it has become increasingly important to ensure that you are domiciled in Florida, that you have waived your domicile in your former state of domicile and that you have properly structured any real or tangible personal property held in a state other than Florida.
Carl Rosen is a partner in the Boca Raton office of Nelson Mullins Riley & Scarborough whose practice focuses primarily on the planning and administration of estates and trusts for a wide range of high net worth individuals and their businesses.