Moving with Purpose and a Plan
Interstate Relocation:
From lockdowns and travel bans to capacity limitations and closed businesses, pandemic life has reduced options and constrained mobility.
But certain exceptions exist, including one with significant impact on our well-being: where we live. Having proved the feasibility of remote work on a large scale, the pandemic has opened the door for many to live where they want rather than where they work. In some instances, it has also increased the desire to move, stirring a renewed sense of purpose to pursue what matters most and enjoy time with family and friends.
Tax Motivations
Another trend is likely also contributing to the relocation impetus: higher taxes. While future policy remains uncertain, the prospect of higher federal tax rates — combined in some instances with recent or proposed tax hikes at the state level — may be causing some families, particularly in high-tax states, to reevaluate their primary residence.
To Move or Not to Move
Deciding whether to move can feel both exciting and overwhelming. It often involves both complicated financial implications and deeply personal considerations. Further, if you decide to move, you will need to take myriad steps to successfully establish domicile for tax purposes in your new location.
If you’re considering a move, we recommend speaking to your financial advisor as early as possible to streamline the process and learn from other clients’ experiences.
To help, below are some factors to consider if you haven’t already:
Lifestyle: While it may seem obvious, evaluate whether your experience living in a new region will meet your expectations. Do you like the culture and climate? Can friends and family visit you affordably and with relative ease?
Access to health care: As you age, you will likely increasingly rely on medical services. Will you have day-to-day access to top-tier health care professionals and facilities in your new primary location?
Education: If you have school-age children, evaluate the options in your destination area. If you decide private school is the best option, factor the associated costs into your relocation decision. While the annual price tag might not seem significant if you are a high earner, the long-term costs, especially for multiple children, can be significant. For example, the average annual cost of private secondary tuition in high-cost states is more than $33,000.1 Multiply that number by three children in secondary school for seven years, and the cost nears $700,000 (without factoring in inflation and other school-related expenses). And that is assuming only an average tuition rate.
Natural disasters: Understand the risk of natural disasters and the cost of insurance in your prospective new state. If you relocate to an area prone to severe weather events, you may need more than a standard policy.
All-in tax impact: The reality is that no state is “tax free.” Especially if your move is at least partly tax-motivated, be sure to evaluate the full spectrum of state taxes, including estate, property and sales tax. Also, understand how other unique sources of income, such as deferred compensation, stock option income and trust income, will be taxed at the state level. The rules vary, but it’s possible that your current state — rather than destination state — will tax this income.
on the move
20% of high earners who work remotely moved between April 2020 and April 20212
42%
of remote workers say that they’re planning to move over the next 12 months2
70%
of luxury real estate agents reported heightened demand3
487%
increase in people moving from NYC from February 2020 to July 2020 compared to same period in 20194
Relocation action items can vary from state to state. Examples include (but are not limited to):
Obtaining a driver’s license in your new state
Filing a Declaration of Domicile (e.g., as it is called in Florida) or similar statement with the local court if applicable in your new state
Reviewing and updating your estate plan and insurance coverage
Registering a vehicle in your new state
Referring to your new domicile in legal documents
Registering to vote in your new state
Updating your mailing address on your credit cards and other account statements
Changing your address on your passport
Making phone calls from your new primary residence
Hosting social gatherings at your new primary residence
Establishing Residency
Don’t Forget the Dog
Lean on Your Financial Advisor
If you decide that relocating is the right decision for you, work with your advisors to map out important action items in the weeks and months ahead, including taking the necessary steps to establish residency in your new state. This should include considering the residency requirements in both your current and new state.
While the decision to move is a highly personal one, your financial advisor can help by:
- Sharing insights gained from serving other clients during similar relocations
- Coordinating with other advisors — your accountant, estate planning attorney, etc. — to facilitate a smooth transition
- Helping quantify the financial ramifications of your move and identifying potential planning opportunities
The list goes on, particularly if you hold multiple residences. In fact, in one well-known case, a court’s decision to accept a petitioner’s argument that his primary domicile was in Texas (rather than the higher-tax state of New York) largely came down to his dog. In her determination, the judge wrote, “As borne out by the evidence in this case, petitioner’s dog was his near and dear item which reflected his ultimate change in domicile to Dallas.”5 This case highlights how difficult and important it can be to establish residency if you spend your time between multiple residences.
Relocation action items can vary from state to state. Examples include (but are not limited to):
Obtaining a driver’s license in your new state
Filing a Declaration of Domicile (e.g., as it is called in Florida) or similar statement with the local court if applicable in your new state
Reviewing and updating your estate plan and insurance coverage
Registering a vehicle in your new state
Referring to your new domicile in legal documents
Registering to vote in your new state
Updating your mailing address on your credit cards and other account statements
Changing your address on your passport
Making phone calls from your new primary residence
Hosting social gatherings at your new primary residence
Having options is a good thing, particularly during a pandemic. Having help with the details — as you concentrate your efforts on living healthy and well-thy — is even better.
1. Educationdata.org. Retrieved from https://educationdata.org/average-cost-of-private-school on August 26, 2021.
2. Apartment List, based on a survey of 5,000 employed adults across the U.S. High earners defined as those making more than $150,000 a year. Retrieved from https://www.apartmentlist.com/research/remote-work-moving-prefs-survey on August 25, 2021.
3. Sotheby’s Luxury Outlook 2021. Based on survey of agents affiliated with Sotheby’s International Reality. Retrieved from https://home.sothebysrealty.com/luxuryoutlook.html on August 25, 2021.
4. MYMOVE based on United States Postal Service data. Retrieved from https://www.mymove.com/moving/covid-19/coronavirus-moving-trends/ on August 25, 2021.
5. Gregory Blatt, N.Y. Division of Tax Appeals, No. 826504, Feb. 2, 2017.