Saturday, December 4, 2021

There’s No Place like Home

Ask the CFP

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“Home is the nicest word there is.” Laura Ingalls Wilder 


Question: As a retiree from another state, with homes there and in Florida, I’m confused about the difference between residency, homestead, and domicile. I receive invitations on various workshops and seminars on Florida Domicile. Can you explain 

Answer: We check mail for a family member who purchased a second home on Marco last year. He is inundated with invitations for Florida Domicile events. You’re in good company with this being a hot topic, especially this year. Hopefullythis information will save you the effort of venturing out and answer your questions.  

The differences between residency, homestead and domicile aren’t as complex athey may appear. A quick history lesson may help with understanding the theory behind the concepts and the differences. 


Homestead 

In 1862, during the Civil War, Abraham Lincoln signed the Federal Homestead Act opening 500,000 square miles of territory in the western United States for settlement. The Act offered free 160-acre parcels of land to anyone willing to settle on them. After five years, these “homesteaders” would become owners of the land as long as certain conditions were met, such as building a home and living on the property. Although the Federal Act was repealed in 1976, many states, including Florida, have their own homestead laws. Homestead simply implies that a home is exempt from seizure or sale for debt.  

In Florida, the homestead law exempts multi-million-dollar mansions total values from attachment. This is one reason why professional athletes and celebrities homestead in Florida.  


Domicile vs. Residence 

You can only maintain one “domicile” at a time but have many “residences” in different states. A former “domicile” must be formally unclaimed, but it can remain as your residence. That is the slightly fuzzy difference.  

It’s a common misconception that establishing Florida domicile means staying in the Sunshine State for 183 days. You must also formally become a non-resident of your former domicile state. The laws are subjective, and the ultimate determination depends on intent and actions. 


Why the Differences Matter 

Great weather, lifestyle and enticing tax benefits make Florida a popular sunshine state. If you decide to domicile and homestead in Florida, your former domiciled state’s tax department will certainly miss the tax revenue you previously provided.  

With increasing deficits, states are keen on keeping all forms of tax revenue, including yours. If you spend time between one or more residences during the year, it is important to choose one state and clearly identify it as your domicile. 


Top Five Reasons to Domicile in Florida 

  1. Florida has no state or personal income tax. 
  2. Florida has no estate or death tax. 
  3. Homestead Laws provide protection against loss of your home to an unsecured creditor. 
  4. The Florida “Save our Home Act” provides an exemption for the first $50,000 of taxable value for all taxing entities, except the school district which allows a $25,000 exemption. Once a property qualifies for the Homestead exemption, the assessed value for tax purposes can’t increase more than three percent during any given year. 
  5. Tenancy by the Entirety is a form of joint ownership for married couples providing unique asset protection benefits, only applicable if a creditor has a claim against only one individual of the married couple.  

According to the Florida State Statutes, Chapter 196, there are ten factors property appraisers consider to determine the intent of someone establishing domicile and claiming a homestead exemption:  

  1. Formal declaration of domicile recorded in public records. 
  2. Evidence of location where dependent children are registered for school.  
  3. Place of employment.  
  4. Date non-Florida residency was terminated. 
  5. Voter registration card with address or other official correspondence from the Supervisor of Elections matching the physical location where exemption is being sought. 
  6. A valid Florida Driver’s license and evidence of relinquishment of licenses from other states. 
  7. Motor vehicle registration on vehicles owned by applicant.  
  8. Address listed on Federal Income Tax return.  
  9. The location of where applicant’s bank statements and checking accounts are registered. Although not exclusively necessary, work with Florida financial professionals whenever possible to support intent.  
  10. Proof of payment for utilities at the property where permanent residence is being claimed. 

That’s all there is to it. The more of these items that are accomplished, the more likely Florida domicile will be upheld if your former state contests your status. Obviously, your former state will work hard to keep your tax revenue while we welcome you to Sunny Florida.  

This is why it’s important to get it right and understand the differences between residence, domicile, and homestead. As always, check with your tax professional to determine the tax consequences of any financial changes that may occur. Legal issues should also be examined as documents and arrangements vary from state to state. Your attorney can advise you if they’ll need to be modified. A CERTIFIED FINANCIAL PLANNER™ Professional can help you coordinate the financial aspects of your move. Stay focused and plan accordingly. 

There is no assurance that any investment strategy will be successful. The opinions expressed are those of the writer as of February 8, 2021 but not necessarily those of Raymond James and Associates, and subject to change at any time. Information contained in this report was received from sources believed to be reliable, but accuracy is not guaranteed. Prior to making an investment decision, please consult with your financial advisor about your individual situation. 

“Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™, CFP® (with plaque design) and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements.”  

This article provided by Darcie Guerin, CFP®, Vice President, Investments & Branch Manager of Raymond James & Associates, Inc. Member New York Stock Exchange/SIPC 606 Bald Eagle Dr. Suite 401, Marco Island, FL 34145. She may be reached at (239)389-1041, email darcie.guerin@raymondjames.com Website: www.raymondjames.com/Darcie. 

 


 

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