What Are the Implications of Changing Residency on Estate and Tax Planning in Michigan?

Tax Planning

Do You Winter Elsewhere?

As is typical for a lot of Michigan residents, many people winter elsewhere. Sometimes called “Snowbirds,” as you may have heard, they can spend part of their time in a sunnier or warmer climate and part of their time in Michigan, along with many others trying to avoid the longer winters in the Midwest.

What does this mean for you if you are estate planning? Or if you or your loved one passes away and has homes in multiple states?

This article will briefly touch on those questions so you can understand your options.

Michigan Estate Tax

While the state of Michigan doesn’t have a specific estate tax, the federal government does, and residents of Michigan will need to plan appropriately for the federal estate tax.

Furthermore, if you own a home in another state, you will need to ensure that you aren’t required to pay estate taxes in that state. If you are, you can plan accordingly with unique estate planning tools to account for the taxes rather than pass most or all of them on to your heirs.

An inheritance tax is also something to consider for beneficiaries. This tax must be planned for if your other residence is in one of the states that include an inheritance tax. Some of the states that require an inheritance tax are New Jersey, Pennsylvania, and Nebraska. If you have a residence there, you may be required to pay state and federal estate taxes and an inheritance tax.

It’s essential to consult with your attorney to determine if another state is better for you financially to relocate to or how to account for out-of-state assets.

Considering Changing Residency to Another State?

By working with your experienced estate planning attorney, you can ensure that if you are looking into moving to another state, you are familiar with the tax implications this can have on your family and your estate.

Learning about what taxes are associated with each state can feel daunting, but you can work with your trusted attorney to discuss all legal details available should you choose to pursue changing residency.

It may be best to stay in Michigan, where you can review with your attorney and get a snapshot of what taxes may look like. If you have residences in other states, this would be an excellent time to discuss those as well so you can transfer titles accordingly if the other state has less appealing tax implications for you and your estate.

Other Tax Implications to Consider

If you are considering moving to another state, you may be mistakenly under the impression that you won’t have to worry about taxes if you have no income coming in. In some states, however, dividends and interest are taxed at varying levels. It’s important to consider what taxes you may be required to pay on this and compare that with if you were to stay in Michigan.

Also of note, some states offer tax breaks on important things such as retirement plan distributions, social security payments, or pension payments. All of these are important to consider, as this can quickly add up even with a smaller estate.

Necessary Changes

Whether you are considering leaving Michigan for another state or moving to Michigan, there are several items to consider and a few steps you should take. If you are changing your domicile to another state, making a few changes is essential to avoid having to pay estate taxes and other fees in both states.

Address changes on your retirement or other investment accounts, bank accounts, insurance policies, and more can be changed. Getting a driver’s license in the new state is another great step.

Selling the house in the previous state or renting it out can be an excellent way to ensure you won’t owe taxes in that state. Speak with your experienced attorney to determine what needs to be done if you choose to keep the home and rent it rather than sell it outright to void unnecessary taxes.

Do You Have Business Interests in Other States?

For those with businesses or business interests in other states, you will also want to consider those taxes as part of your estate planning. You may owe more than you think and will want to account for that in your comprehensive estate plan.

Speak with your estate planning attorney to determine any tax implications your business or business interest in another state may have and how to effectively plan for it so you aren’t leaving your beneficiaries with unnecessary taxes to pay.

Planning Ahead if One of the Most Loving Things We Can Do

Even the most simple of estates can benefit from a comprehensive estate plan. There are often multiple angles that we haven’t considered, and therefore, we can discuss an adequate plan with our experienced estate planning attorney.

Whether your best option is to stay here in Michigan or to move out of state, a thorough review of your current estate can help you make an effective decision, saving you a significant amount of money now and saving your beneficiaries money in the future.

With a wide array of resources and tools available, everyone can have the customized estate plan of their choosing and one that is effective at meeting your goals now and well after you are gone.

Contact our office today at (248) 997-4394 to schedule your consultation and learn more about how we can best assist you.

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