Florida Lawyer Trust & Probate Blog
By Phillip B. Rarick, Miami Trust Attorney
In addition to our sunshine, Florida has one of the best tax and asset protection climates of any state in the country. Florida has no state income tax, no fiduciary tax, no intangible tax, no estate tax, and arguably the most generous homestead laws anywhere in the U.S.A: you can have a multi-million dollar home and this residence will be virtually untouchable by creditors. However, moving to Florida without proper planning does have risks. This Report discusses the risks and explains how to clearly establish Florida domicile.
Before making the move to Florida, it is important to seek legal counsel of a Florida trust attorney to ensure that you will be able to reap all the benefits of Florida law.
Trap #1: Failure to Escape Fiduciary or Income Tax of Your Former State
Failure to make proper revisions in the Trust for a person moving to Florida may result in tax exposure in your former state. Florida is one of only seven states that does not impose a fiduciary income tax. Other states impose a tax at top rates from 3% to 10.3%. See Jeffrey A. Kern and H. Allan Shore, So You Left Your Trust at Home When You Moved to Florida, The Florida Bar Journal, May, 2009.
Here is a sampling of how some states determine their jurisdiction to tax a Trust.
New York. Taxes solely on the basis of the resident Settlor or Testator with the exception for a resident Trust where all of the following are satisfied: (1) all Trustees are domiciled outside of New York; (2) all Trust assets are located outside of New York; (3) there is no New York source income.
Note: One dollar of New York source income can trigger New York jurisdiction.
Illinois & Pennsylvania. These states tax the fiduciary income of a Trust if the sole connection to the Trust is a resident Settlor of a living Trust or resident Testator of a testamentary Trust.
Massachusetts. Tax jurisdiction based on residence of Trustee. Can be avoided by ensuring all Trustees reside in Florida.
Connecticut. Similar to Illinois, however in the case of a living Trust, with a resident Settlor, the Trust must have a resident beneficiary for Connecticut to impose its tax.
Michigan. Taxes a living Trust on the basis of a resident Settlor unless all beneficiaries, all Trustees, and all administration of the Trust takes place outside the state. Michigan taxes a testamentary Trust solely on the basis of a resident Testator.
Trap #2: Failure to Take Your Trust
A common oversight of persons moving to Florida is failing to take their Trust. You may have packed your Trust and taken it with you, but if the Trust situs remains in your original state the Trust has not actually moved. This is usually a mistake which can be easily remedied. To avoid this trap, you should have all your Trusts reviewed by a Florida attorney regarding such issues as: (1) transfer of governing law or place of administration; (2) change of Trust from non-grantor to grantor status; (3) change of Trustees or their successors; (4) transfer of insurance policies; (5) other desired revisions.
Trap #3: Failure to Name a Florida Qualified Trustee
Another common problem is if the Trust names a non-Florida Trust company or law firm as Trustee or successor Trustee. Under Florida law, a law firm or Trust company not licensed in Florida cannot act as Trustee or personal representative of a Will unless it qualifies as a Trust company in Florida.
Side Note: A non-Florida attorney cannot act as Personal Representative or Executor in the Will unless he or she is related to the Testator.
How to Avoid the Traps
The short answer is this: Clearly establish domicile in Florida. Don’t be a “straddler” where you have two or more states claiming jurisdiction because you have failed to clearly establish domicile in Florida. Straddler’s may be surprised that their former state is claiming income or fiduciary taxes.
F.S. 731.201(11) defines domicile as “a person’s usual place of dwelling.” Although legally a person’s subjective intent is determinative of domicile, Florida tax authorities place great weight on the following objective criteria checklist, even though there is no mathematical formula.
Objective Criteria. Establishing Florida domicile requires you to take some – not necessarily all – of the following steps:
- File a Declaration of Domicile in county where you live pursuant to F.S. 222.17
- File for the Florida homestead property tax exemption
- Execute a new Florida will and restate or amend Trust documents; see Note below
- Refer to Florida residence in your Will and/or Trust
- Register to vote in Florida and in fact vote
- File federal income tax return with the IRS in Atlanta, Georgia
- Change address on passport
- Obtain Florida auto driver’s license (and, if feasible, relinquish license from other state)
- Obtain Florida license plates (and relinquish plates from other state)
- Open a Florida bank account
- Affiliate with Florida organizations
- Change credit cards to Florida address
- Transfer safe deposit box contents to Florida box
- Affiliate with a church, temple or mosque in Florida
- Relinquish homestead claimed in another state
Note: Your new Florida trust should have specific language concerning: (1) Florida law to control validity and construction; (2) principal place of administration; (3) determination of situs; (4) transferring situs; and (5) substituting Trustee upon change of Trust situs.
In addition to our sunshine, moving to Florida often has excellent tax and asset protection advantages. However, it is not without risk, as your former state may claim tax jurisdiction over you or your Trusts. Upon moving to Florida, you should have your entire estate plan reviewed by a Miami trust attorney. This estate plan may include your trusts, will, durable power of attorney, living will, and health care power of attorney. Proper planning will allow you to truly enjoy the warm Florida tax climate.
For more information, contact Phillip B. Rarick, Miami trust attorney, at (305) 556-5209 or firstname.lastname@example.org.
The information on this blog is of a general nature and is not intended to answer any individual’s legal questions. Do not rely on information presented herein to address your individual legal concerns. If you have a legal question about your individual facts and circumstances, you should consult an experienced Miami trust attorney. Your receipt of information from this website or blog does not create an attorney-client relationship and the legal privileges inherent therein.