Why Is the New Tax Law A Good Reason to Retire in Florida?

Florida is looking better every day, thanks to changes in the federal tax code. A newly enacted limitation on the deductibility of state and local taxes (SALT) is motivating people from high-tax states, like Illinois and New York, to explore new ways to reduce their tax exposure. That’s leading them to move to Florida. The change in the federal tax code, combined with Florida not having any personal state income tax, has become a key reason for the relocation of many to the Sunshine State.

The Miami Herald recently reported in the article, “Federal tax changes make the Sunshine State even sunnier,” that since the new tax law went into effect in 2018, many people have been considering relocating to Florida. There is good reason. Under the new rules, taxpayers, generally, can only deduct up to $10,000 of SALT as an itemized deduction, which is just a small part of what’s typically paid in these states.

Establishing Florida as your domicile isn’t that easy. While spending 183 days in Florida will help you become a resident, establishing domicile in a new state requires a bit more legwork. Developing a plan of action is crucial to ensuring a seamless process and avoiding penalty-invoking errors.

Moving your domicile to Florida doesn’t mean you must sever your ties with your former home state. Maintaining secondary residence, spending time with family and other activities can all continue, but must be judged against evidence that supports intent, facts and circumstances:

  • Keep good records, like diaries, monthly shopping and flight records to be able to prove that you’ve spent a minimum of 183 days in your new home state;
  • File a Florida Declaration of Domicile;
  • Buy a home in Florida, file for homestead and relinquish it in your previous home state;
  • Register to vote, get a Florida driver license, transfer your car registration and relinquish these rights in your previous home state;
  • File all federal income tax returns and any other state and governmental items with a primary Florida address;
  • Relocate your primary business activities to Florida, if applicable;
  • Open Florida-based bank accounts and move any safe deposit boxes;
  • Do the majority of your spending activities here, like shopping and charitable giving;
  • Get involved with religious and civic organizations in your new hometown; and
  • Update your estate planning documents.

Another major item when planning a relocation, is the lack of tax on transfers of wealth upon death, like an inheritance, or during life, such as a gift. The same states (like Illinois) that impose large income taxes also often impose inheritance and gift taxes that can tax up to 20% with lower exemption levels than at the federal level. While inheritance and gift taxes at the state level can be imposed on estate and gifts as low as $1,000,000, cumulatively, Florida doesn’t have these taxes.  Currently, the State of Illinois imposes a tax on estate and gifts in excess of $4,000,000.  This means that in high-tax states (like Illinois), estate and gift taxes could be imposed, even if there’s no federal estate tax imposed.

Adhere to the requirements mentioned above, so you aren’t still taxed in your former state. High tax states know they are losing residents, so they are likely to be more vigilant about making sure that newly-declared Florida residents meet all the requirements. Be ready to prove your residency, or face taxes from your previous, high-tax state.

If you are interested in discussing the possibility and benefits of becoming a Florida resident, please give a call to Michael T. Huguelet, P.C.  We have lawyers licensed to practice in the State of Florida; and, who have actually practiced in the State of Florida.  We look forward to helping you make your decision.

Reference: Miami Herald (February 22, 2019) “Federal tax changes make the Sunshine State even sunnier”

Why Is a Revocable Trust So Valuable in Estate Planning?

There’s quite a bit that a trust can do to solve big estate planning and tax problems for many families.

As Forbes explains in its recent article, “Revocable Trusts: The Swiss Army Knife Of Financial Planning,” trusts are a critical component of a proper estate plan. There are three parties to a trust: the owner of some property (settler or grantor) turns it over to a trusted person or organization (trustee) under a trust arrangement to hold and manage for the benefit of someone (the beneficiary). A written trust document will spell out the terms of the arrangement.

One of the most useful trusts is a revocable trust (inter vivos) where the grantor creates a trust, funds it, manages it, and has unrestricted rights to the trust assets (corpus). The grantor has the right at any point to revoke the trust, by simply tearing up the document and reclaiming the assets, or perhaps modifying the trust to accomplish other estate planning goals.

After discussing trusts with your attorney, he or she will draft the trust document and re-title property to the trust. The assets transferred to a revocable trust can be reclaimed at any time. The grantor has unrestricted rights to the property. During the life of the grantor, the trust provides protection and management, if and when it’s needed.

Let’s examine the potential lifetime and estate planning benefits that can be incorporated into the trust:

  • Lifetime Benefits. If the grantor is unable or uninterested in managing the trust, the grantor can hire an investment advisor to manage the account or a spouse, child, trusted friend or a trust company to act for the grantor.
  • Incapacity. A spouse, child, trusted friend or trust company can be named to care for and represent the needs of the grantor/beneficiary. The spouse, child, trusted friend or trust company will manage the assets during incapacity, without having to declare the grantor incompetent and petitioning the Court for a guardianship. After the grantor has recovered, he or she can resume the duties as trustee.

A properly funded revocable trust is a great tool for estate planning because it bypasses probate, which can mean considerably less expense, stress and time.

In addition to a trust, please ask the attorneys of Michael T. Huguelet, P.C. about the rest of your estate plan: a will, powers of attorney, medical directives and other considerations.

The law office of Michael T. Huguelet, P.C. would be honored to sit down with you to discuss your needs and develop an estate plan to help you achieve what you want to accomplish.

Reference: Forbes (February 20, 2019) “Revocable Trusts: The Swiss Army Knife Of Financial Planning”

Why Do I Need a Will?

Estate planning is a very personal process. It is not a one-size-fits-all task. When a person has no close relatives (other than perhaps a spouse), the decisions needed to create an estate plan can be overwhelming. Kiplinger’s recent article, “No Children? Why You Still Need an Estate Plan,” provides some ideas, if you find yourself struggling:

Incapacity. Everyone should have an advanced directive for health care and a durable power of attorney for legal and financial decisions. These let you decide who will be in charge of your medical and legal affairs, in the event you are no longer able to make these decisions for yourself. If you become incapacitated without these documents, your relatives will be involved in a guardianship or conservatorship proceeding to appoint someone (who you may not know) to make these decisions for you.

Trusts. This is a legal document that can be used to manage many of your assets during your life, and facilitate the distribution of your assets when you pass away. A trust has two big advantages: it often helps avoid probate at your death and allows you to distribute your assets privately. Without at least a will, your family (as determined by the state intestacy laws) could inherit your assets. The best way to avoid these issues is to create a trust.

Deciding What to Do with Your Assets. This can be a tough decision.  Children often want to make sure that their parents are cared for. However, since many of us will survive our parents, successor beneficiaries must be named. Nieces and nephews are typically beneficiaries, when there are no children. However, you may want to consider friends, pets and charities. Talk to the estate planning attorneys at Michael T. Huguelet, P.C. to review the best way to leave your assets.

Charities. These can also be included in your estate plan. Charitable bequests can be either a specific bequest for a general or specific purpose. If the charitable gift is sizable, contact the charity beforehand to be certain your gift is used, and recognized, in the way that makes you most comfortable.

Pets. Your estate plan can also help establish who will take care of your pets, when you’re no longer here. You can leave the pet and some money to a trusted friend or family member, or you can create a formal pet trust to provide for your pet. Either way, create a plan so your pet can be properly cared for, if you are no longer able to do so.

When it comes to estate planning, you can decide who will inherit your assets. To be certain your wishes are executed as you intended, it is important to have the proper planning in place to avoid probate and allow for an efficient transfer. The attorneys at Michael T. Huguelet, P.C. would be happy to sit down with you, and assist with the decision making process so you have piece of mind that your assets are left to those who mean the most to you.

Reference: Kiplinger (February 11, 2019) “No Children? Why You Still Need an Estate Plan”

Moving to a Care Community? Check the Fine Print

Reading the fine print when purchasing a home in a retirement community or a care community is intimidating. The typeface is tiny, you’ve got boxes to pack and movers to schedule and, well, you know the rest. What most people do, is hope for the best and sign. However, that can lead to trouble, advises Delco Times in the article “Planning Ahead: Moving to a care community? Read the agreement.”

If you don’t want to read the fine print or can’t make head or tails of what you are reading, one option is to ask your estate planning attorney for assistance. Without someone reading through and understanding the contract, you and your family may be in for some unpleasant surprises. Here are some things to consider.

What kind of a community are you moving into? If you are moving to a Continuing Care or Life Care Community, your documents will probably have provisions regarding health insurance, entry fees, deposits, a schedule of costs if you need additional services, fees for moving to a higher level of care and provisions for refunds.

When you enter an assisted living facility, you may find yourself signing documents regarding everything from laundry policies, pharmacy choices, financial disclosures and statements of your rights as a resident. Not every document you sign will be critical, but you should understand everything you sign.

If moving into a nursing home that accepts Medicaid, you and your family should speak with an elder law attorney who can make sure you have completed the Medicaid application correctly and are in full compliance with all of the requirements.

Almost all agreements will say that the applicant, or the person receiving services, is responsible for payment from their own assets.  If someone signs the document who is not the applicant/future resident, that person may become responsible for the costs, depending upon what role you have when you sign: are you a guarantor or indemnitor? That person typically agrees to pay after the applicant/resident’s funds are exhausted. The payments may have to come from their own funds. Sometimes the “responsible party” is simply the person who handles business matters on the applicant’s behalf. You’ll want to be sure that everyone understands what they are agreeing to so as to avoid any surprise.

If possible, the person who will receive services should be the one who signs any paperwork, but only after a thorough review from an experienced attorney.  The attorneys at Michael T. Huguelet, P.C. would be happy to review any contracts or other documents to provide you and your family members piece of mind when evaluating such a transaction.

Reference: Delco Times (Feb. 5, 20-19) “Planning Ahead: Moving to a care community? Read the agreement”