Dual State Residency for the High Net Worth Investors –PillarWM

In the past years, several states have raised their state income taxes significantly; however, seven states do not have state income taxes. As an outcome of this disparity, a growing number of taxpayers may consider changing their tax residency. It is worthwhile to note that dual state residency can have complications such as becoming liable for dual taxation. That is why it is advisable to work with a professional in such matters. If you’re looking to invest more than 5 million dollars, you likely understand the importance of having the right expert to guide you in your wealth management. If you would like to read our expert insights for high-net-worth investors, you can request a copy of our book, 7 Secrets to High Net Worth Investment Management, Estate, Tax, and Financial Planning.

STRATEGIES FOR FAMILIES WORTH $5 MILLION TO $500 MILLION

 

7 Secrets To High Net Worth Investment Management, Estate, Tax and Financial Planning

 

The insights you’ll discover from our published book will help you integrate a variety of wealth management tools with financial planning, providing guidance for your future security alongside complex financial strategies, so your human and financial capital will both flourish.

Clients frequently share with us how the knowledge gained from this book helped provide them tremendous clarity, shattering industry-pitched ideologies, while offering insight and direction in making such important financial decisions.

If you are looking to invest between 5 million to 500 million dollars, you can consider working with a private wealth management firm for your financial management. Pillar Wealth Management has helped high-net-worth and ultra-high-net-worth clients with their wealth management for decades. Our wealth managers are dedicated to understanding and meeting your unique requirements and creating a customized plan that helps you achieve your financial objectives. If you would like to consult with one of our experts, you can schedule a meeting.

This article can help you understand dual state residency requirements and how to establish dual state residency as a high-net-worth or ultra-high-net-worth investor.

What is Meant by Dual State Residency?

If you’re wondering, “How can you have dual state residency?” a dual state residency applies when you live in two different states, i.e., you have residency in two states. Your permanent home, as known as your domicile, is your place of legal residency. An individual can only have a single domicile at a time. While each state can have its own criteria for defining who a resident is, typically, a resident is someone who is in that particular state for purposes that are not temporary.

Renouncing your residency in a high-tax state with the aim to avoid taxes is not as simple as it sounds, though. Depending on state tax laws, you could be charged with dual taxation if you’re a resident in both states. Some states can tax you on your entire income, regardless of where or how you earned it.This can even include the profits you make through investments.

Hence, you should take precautions when it comes to your tax planning. Our book,7 Secrets to High Net Worth Investment Management, Estate, Tax, and Financial Planning, offers insights on strategies that wealth managers use to manage the taxes of high-earners with millions of dollars to their name. You can request a copy to read them for yourself!

People with higher incomes are more likely to engage in business and investment practices because they can benefit from the tax incentives and deductions available to other taxpayers who partake in those activities. Similarly, some financial planners advise their clients to invest in securities that incur lower taxable on the profits gained. Our wealth managers are experts at optimizing the portfolios of high-earners who would like to invest millions of dollars. You can read more about how they achieve this by reading our 5 critical shifts guide.

dual state residency

How State Taxes Apply to High-Earners

Although there are benefits to being a high-earning individual in this country, a high-net-worth financial status can incur some tax implications as well. The alternative minimum tax (AMT), which is a flat rate applying to the adjusted sum of taxable income above a particular threshold, applies to others. The exemption is far higher as compares to the regular income tax exemption.

State taxes affect investors with millions of dollars more than they affect the average taxpayer. State income taxes are charged on any income you generate within a particular state. Generally, states charge taxes through any one of the following means, no income taxes, flat income tax rates, or progressive taxes.

Alaska, Nevada, Florida, South Dakota, Tennessee, Texas, Washington, and Wyoming are the states that do not charge an income tax. North Carolina, Michigan, New Hampshire, Colorado, Kentucky, Illinois, and other states follow a single tax rate charged on all profits. D.C. and a majority of the states have progressive tax structures, which means that higher incomes are liable to higher tax rates.

States that put high-earners in high tax brackets can have tax rates up to 14%, excluding the taxes you’ll have to pay on property, utilities, fuel, and other facilities. Relocating to a state with no income tax might seem like a good prospect, but you should keep in mind that these states could have higher property taxes, sales taxes, and more. Rigorous tax planning throughout the year can help you overcome the hurdles associated with taxes. If you want to invest more than 5 million dollars while keeping an eye on your taxes, you can request a copy of our book,7 Secrets to High Net Worth Investment Management, Estate, Tax, and Financial Planning – For Families With Liquid Investable Portfolios Between $5 Million and $500 Million, for insights on tax planning.

How To Establish Dual State Residency

According to the 183-day rule for state residency, a person is considered a resident of a state if they spend more than 183 days out of the year in that particular state. This includes living in one state but working in another. If you have not been to your domicile state for 183 days, you can be considered a dual resident. Hence, you can be taxed in both states.

To avoid dual taxation, it is important to establish residency in your new state. To establish a domicile in another state, you can take steps such as:

• Selling your house, list it for sale, or rent it out for an extended time to third parties.

• Moving your personal belongings from your former residence to your new one.

• Try to avoid going back to the previous state for as long as possible. If a state contests your claim that you moved, they could subpoena your mobile phone records to prove your whereabouts.

• Purchasing a new home in the state you’re trying to establish residency in and moving into that home.

• Registering to vote in your new state.

• Getting a new driver’s license in your new state.

• Registering your vehicles in the state you want to be established as your domicile.

• Being employed in your new state.

• Getting memberships in local clubs or foundations.

Changing and establishing residency in a new state is a proactive process that necessitates proper preparation and documentation. You should speak with a legal expert if you want to learn more about dual state residency requirements or the requirements for obtaining citizenship in another state. Our wealth managers can assist you with your tax management and wealth management. If you would like to find out more about our services, you can call us up to book a meeting. We can help you with a variety of wealth management services, such as investment management, estate planning, and wealth enhancement. If you want to learn more about our strategies to improve portfolio performance, you can read our Performance Guide.

Statutory Residency and Presumption of Residency

As a high-earner, you should be aware of the risks that come with a high-net-worth. Our book, The Art of Protecting Ultra-High Net Worth Portfolios and Estates – Strategies for Families Worth $25 Million To $500 Million, talks about how well-off families can protect their assets and safeguard their future.

Dual state residency can be established if you are a statutory resident of another state. In this case, you’re considered a statutory resident if you maintain a permanent place of residence in that state or spend more than 183 days in that state. Of course, these rules differ with each state and how they establish residency.

In New York, residency rules can be bothersome for non-residents who have a home there, even a vacation home. They can be considered statutory residents, but that will not exempt them from the taxes in their domicile state. There is the option to obtain relief via tax credit for some of the double-taxed income, but the entire tax burden cannot be eliminated. In California, you are considered a resident if you spend more than nine months in that state.

Apart from income taxes, changing your residency can incur estate taxes or inheritance taxes, depending on the state. For example, Illinois and New York both impose the highest estate taxes, but Florida has no state estate tax obligations. These are applicable to the in-state properties. Tangible properties or real estate located situated in a taxpayer’s domicile is subject to estate taxes by the state in which they are located.

Valid, contrary evidence can be used to resolve residency presumptions, but it is better to avoid getting caught in these situations in the first place. Hence, you should consider working with a financial professional to help you navigate through this process. Our wealth managers are trained in handling the complex financial situations of high-earners. If you would prefer to get in touch with our team for assistance in your wealth management, you can schedule a consultation with us.

Points to Take Home

With dual state residency, there is no assurance that you’ll be taxed as a resident of your choice of stead. Changes in residency are assessed on specific facts and your individual circumstances. Moreover, many states are proactive in resisting changes in residency to prevent losing tax revenue.

With all the variables to consider, changing your residency status can be a complicated procedure. Relocating may not be the best choice for you, depending on your financial situation and priorities. A financial advisor can provide you with the best advice on this subject while also educating you about essential details such as which states do not levy a state tax, how to establish dual state residency and dual state residency requirements.

Wealth managers are well-versed in numerous financial matters concerning high-earners, including dual state residency and how it affects your tax bill. At Pillar Wealth Management, our team of wealth managers offers an array of wealth management services, from tax management to risk management. We can help you enhance your wealth while keeping an eye on any potential risks or liabilities. If you are interested in investing between 5 million to 500 million dollars, we can help you with your investment management by creating a personalized financial plan. If you are interested in availing of one of our services, feel free to contact our team for a free initial consultation.

Authors

To be 100% transparent, we published this page to help filter through the mass influx of prospects, who come to us through our website and referrals, to gain only a handful of the right types of new clients who wish to engage us.

We enjoy working with high net worth and ultra-high net worth investors and families who want what we call financial serenity – the feeling that comes when you know your finances and the lifestyle you desire have been secured for life, and that you don’t have to do any of the work to manage and maintain it because you hired a trusted advisor to take care of everything.

You see, our goal is to only accept 17 new clients this year. Clients who have from $5 million to $500 million in liquid investable assets to entrust us with on a 100% fee basis. No commissions and no products for sale.

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