How to Change State Residency

Tax planning is one of the biggest concerns for people with $5 to $500 million in investable wealth. It is no secret that affluent individuals pay a significant portion of their wealth in taxes. Unfortunately, there’s nothing much they can do to change this. However, since they pay the most in taxes, they have a chance to save the most by implementing an intelligent tax minimizing strategy. You must also know how to change state residency to reduce your taxes. A high net worth portfolio calls for a unique approach to taxes. The best way to go about this is by consulting with a professional financial advisor. They will guide you on changing your state residency for tax reduction and help you develop an effective tax strategy to minimize your losses in the long run. If you want to learn more, we urge you to request a free copy of our book, 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.

To discuss this topic further, you can always reach out to us at Pillar Wealth Management. Our services are exclusively aimed at assisting high net worth and ultra high net worth individuals with tax planning and overall financial planning. We understand how important tax minimization is for preserving your wealth. Our experts will create a plan tailored to your unique financial situation and needs.

Without further ado, let’s discuss how to change state residency for tax reduction.

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How to Change State Residency for Taxes How Do I Change My Residency to Another State?

How to Change State Residency for Taxes

If your state has high taxes, moving to another state makes sense. It is one of the simplest ways to lower your state tax bill and increase your savings. However, you must ensure that the new state is your domicile (a place of legal residency). Otherwise, your old state will be able to ask you to pay your taxes even after you’ve moved. On top of this, the new state may also ask for taxes when you’re paying the old state.

The Importance of Establishing Domicile

Once you decide to move to a new state permanently, you should establish domicile to avoid paying double taxes. While the definition of state domicile may vary from state to state, it generally refers to a permanent home location where you’d like to return even after living somewhere else for long periods.

Since domicile-related rules vary in each state, you can end up owing taxes to both states if you don’t act smart. Hence, it is critical to know and follow the rules in your old and new state.

8 Steps to Establishing Domicile in a New State

Follow the steps below to establish legal domicile in the new state.

1. Maintain a diary for the time you spend in the old and new state (you should spend more time in the new location).

2. Update your mailing address.

3. Get a driver’s license in the new state and get your vehicle registered.

4. Register as a voter in the new location.

5. Close previous bank accounts and open a new one in the new state.

6. File income tax return in the new location, if need be. File a non-resident return or no return in the old one.

7. Purchase or lease a property in the new state and sell or rent out the previous location.

8. Update your address on important documents, including your passport, insurance policies, living trusts, and wills.

The more time you spend in the new state and the more effort you make to establish domicile there, the harder it will be for the old state to claim you as a resident for tax purposes.

When Do You Have to Change Your State Residency?

For many affluent individuals, moving to a tax-friendly state is a part of the retirement plan. This usually happens in New York and California. People tend to move to a new state once their working years are over. This is one of the best ways for families to minimize their losses and protect their wealth.

You may not realize this but if you own liquid assets worth over $5 million, a significant portion of your wealth will go to taxes over the years. Why pay so much in taxes when there are several tax-friendly states you can move to?

Tax planning can be overwhelming when you have a large amount of wealth. The goal is to have a clear mind and keep emotions out of the way while making important decisions. In our portfolio optimization guide, we have shared practical tips and tricks to help you preserve your wealth for a stress-free retirement period.

As an affluent individual, you shouldn’t miss out on any opportunity to increase your gains and minimize your costs. Everything should be done while keeping your risk tolerance in mind. This is the secret to growing your wealth.Discover five shifts that are a must for investment portfolio optimization in our guide.

No matter how much money you accumulate over the years, maintaining your desired lifestyle after retirement remains a concern. We have put together an exclusive book called The Art of Protecting Ultra-High-Net-Worth Portfolios and Estates – Strategies for Families Worth $25 million to $500 million for ultra high net worth individuals. You can order a hardcover copy for free.

That being said, many clients hesitate to move to a new state despite higher taxes because of family. Oftentimes, retirees don’t want to leave their children and grandchildren behind. Therefore, they end up downsizing their primary residence in their state and buy a small house or condo in another state.

Now, let’s find out how to change state residency for tax purposes.

How Do I Change My Residency to Another State?

From finding a new property and efficient movers to finding a job and making friends, moving to a new state can be a confusing and overwhelming experience. While there is so much to do, you must remember that establishing residency in the new state should the top priority.

Otherwise, you may find yourself dealing with IRS and other government organizations. Not to forget, it can also limit your ability to own a vehicle, drive, and vote in the new location.

Establishing Residency in a New State for Tax Purposes

Tax reduction is the most common reason for affluent individuals to move to a new state. The state where you establish domicile should be where you spend the most time. In many states, the law requires individuals to stay for at least 183 days before claiming to live there for tax purposes.

This means that simply opening a bank account in a new location or changing your driver’s license is not enough. You can’t establish domicile without unless you actually live there for a considerable period.

Wondering why?

It’s because many states, such as Alaska, Florida, South Dakota, Texas, and Washington, don’t require their residents to pay taxes. However, several residents may own properties in another state that does require them to pay taxes. Considering this, if you want to avoid paying tax, you’ll have to live in a state that doesn’t impose income taxes for 183 days.

Click here to talk to our expertson this matter now!

As mentioned earlier, you need to follow a few steps to change your residency to another state. Let’s discuss those in detail.

How to Change State Residency

Step 1: Find a New Home

First of all, you must find a place to live in the new state. It doesn’t matter if you purchase a home or rent an apartment. All you need is a permanent address.

Step 2: Establish Residency

If you intend to make the chosen state your permanent home, you’ll have to establish domicile shortly after moving. In addition to the steps already discussed, you may have to fill out a “Declaration of Domicile” document. States that people prefer to move to due to tax purposes require you to fill out this document.

Step 3: Change Your Mailing Address

After purchasing a new property, you must update your mailing address with the USPS.On the official website, you’ll have to select a date to start forwarding your mail.

Step 4: Inform Utility Providers of the Change of Address

The next step is to call your utility service providers and inform them of the updated address. Don’t forget to reach out to your insurance provider. It is best to shop around and compare rates from different property insurance providers in the new state.

Step 5:Update the IRS Address

You should also update the IRS address at your earliest to prevent any delays in receiving tax refunds and correspondence. You can update your information at any time through form 8822.

Step 6: Register to Vote

This is one of the most important steps when establishing domicile in a new state. You can visit or call your local town hall for details. You may be able to register to vote when getting your driver’s license.

Step 7:Apply for a New Driver’s License

If you had a driver’s license in the old state, getting one in the new location shouldn’t be a hassle. Check all the requirements before applying for it. You may be asked to carry your old driver’s license along with social security card, proof of residency, and other forms of identification.

When getting a new driver’s license, don’t forget to register your car and get a new license plate as well.

Step 8: File Taxes

After moving, you’ll have to file your tax returns in the new state to establish residency. You might want to work with an accountant to make this process a breeze.

Step 9:Update Your Bank Account Details

To establish domicile in the new state, you’ll have to update your credit card billing address and other bank account information shortly after the move. You’ll also have to open a bank account in the new location.

Step 10:Get Your Pet Registered

If you’re moving with a pet, you’ll have to get him\her registered and buy a license within a month of relocation. This will help ensure that your pet is vaccinated for public safety purposes.

Step 11:Announce Your Relocation

Finally, it’s time to inform your friends and family that you’ve moved to a new state! Thankfully, you can send them an email or make a social media post to make it official.

Moving to a new state for tax purposes is a big move. It can change your life for good, so make no mistakes.The best way to go about this is by consulting with a financial expert. They have in-depth knowledge of tax minimizing strategies and will help you make well-informed decisions. Discover how to choose the right expert by requesting a free copy of our book, 7 Secrets to High-Net-Worth Investment Management, Estate, Tax and Financial Planning.

You can also schedule a non-obligatory consultation with usto discuss if moving to another state is the right option for you based on your current circumstances.

Learn More about Changing State Residency at Pillar Wealth Management

Financial experts at Pillar Wealth Management will be happy to guide you on how to change state residency for income tax purposes. Our team boasts several decades’ worth of experience helping affluent clients with tax planning. Our holistic, client-focused approach prioritizes tax minimization to protect your financial security in the long run.

If you have $5 million to $500 million in investable wealth, you’ll find this experience worthwhile. Our professionals will help you every step of the way, ensuring that you minimize your losses and preserve your wealth in the best possible way.

For more information, book a complimentary meeting with our team today.

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