What to Do with an Estate with Foreign Assets (Even that “Little” Bank Account in Europe)
If you are a Stites on Estates reader in a state where it's cold in the winter, you have probably seen them: people who seem to live in your own neighborhood and golf at your club, but have a car with a Florida license plate.
Who are those people?
They're the lucky ones: the Snowbirds who get a tax cut and a host of other advantages for living in where there are beaches, Disneyworld, citrus groves, lots-and-lots of condominiums, and it's not cold in the winter.
Not a bad gig, even if (suspiciously) they seem to be not-in-Florida during hurricane season.
Florida residency is common for many retired Kentucky snowbirds. And it's easy to see why.
First. there are income tax advantages: Florida's constitution prohibits imposition of a state income tax, and generally prohibits municipalities from levying income taxes.
For Kentucky taxpayers who become Florida residents, that's equivalent to a 6% pay raise (and more if you live in Louisville or Lexington, where there is both city and state income tax).
Second, there are property tax advantages: Florida provides residents with property tax abatement and caps on annual increases in assessed value.
Third, there are inheritance tax advantages: unlike Kentucky, Florida has no inheritance tax - which can be quite significant for people with beneficiaries of their estate plans that are nieces, nephews, friends, or domestic partners.
In addition to providing tax advantages, Florida offers excellent asset protection opportunities, because of the powerful creditor protection advantages for homestead real estate included in its state constitution, and its statutes allowing tenancy by the entireties ownership by married couples for both real estate and financial accounts.
Florida is happy to have new residents, but to avoid Kentucky taxation a snowbird should plan to spend at least 183 days per year in Florida, and take several measures demonstrating intent to establish and maintain a Florida domicile.
These measures include ones that are rather obvious, as well as ones that are more subtle:
Cars: obtain a Florida driver's license, register an automobile in Florida, and insure cars in Florida.
Civic Participation: register to vote in Florida, cancel voter registration in one's prior home state, shift club memberships and church affiliations, update alumni directories, and redirect political contributions away from the prior home state to Florida.
Real Estate: apply for homestead exemption for a residence owned in Florida, sell property in one's prior home state (or rent it out at least part of the year).
Paper Trail: record a Declaration of Domicile in the Florida county of residence and update an estate plan to reflect Florida residency.
Financial: establish bank accounts in Florida, and shift investment accounts to Florida.
Other: even during basketball season, restrain yourself and don't post pictures on Facebook of your Florida home with "Go Cats" or "Go Cards" banners hung across the porch.
Andrew Berger has provided a comprehensive checklist for establishing Florida residency here. (It's so in depth it even mentions getting a Florida library card!) Carter's friend Robert Eardley wrote an article on snowbirds establishing Florida residency, available here, and an article Robert and Carter wrote on residency and estate planning issues for Kentucky snowbirds in Florida is available here.
Image above courtesy of State Library and Archives of Florida.