Establishing Legal Residency in a New State

• Locate a place to live in the new state of choice. Purchase a home if you can, although it is not required.  You must spend at least 6 months and 1 day at this new home to claim residency in your new state.  The new state must be your “Domicile” (generally meaning "permanent home").
• Spend substantial time in the new “home” state during vacations and holidays.
• Next, establish a home address with the U.S. Postal Service by going to the nearest post office and filing a change of address form.  The new home must be your primary mailing address.
• Have your important documents transferred to your new home address (insurance, memberships, licenses, etc.).  
• Obtain a driver's license and car registration in your new home state, or apply for a non-driver's state ID card if you do not drive.
• Register to vote in your new home state.
• Register motor vehicles in your new home state and make sure insurance rates are based upon your new state residency.
• Establish a banking relationship in the new state.
• Establish new professional relationships such as an accountant, lawyer, dentist and doctor. 
• Establish social groups and relations in the new home state, such as joining a health club, country club, civic, or business groups.
• Become a member of a local church.
• If you have professional licenses, have them transferred to your new state. Do this by contacting the governing board of your occupation in the new state (nurses, physicians, social workers, attorneys, etc.). Temporary licensing can often be granted immediately while you are waiting for the permanent license.
• Purchase a resident hunting or fishing license in the new home state, and if you continue these sports in your previous state purchase a non-resident license there.
• If retaining any property in your previous state, make sure it is “non-homestead” (if applicable) property for property tax calculations.

NOTE FOR MINNESOTA RESIDENTS:  Minnesota courts have recently demonstrated in their rulings a reluctance to let the taxpayer establish a residency change while maintaining a “presence” in Minnesota.  The court cases suggest that a complete break with Minnesota must be established in order to evidence a taxpayer’s intent to change residency from Minnesota to another state.  Not all states have been as aggressive as Minnesota in establishing difficult rules to comply with.  Check your home state rules for specific requirements.

IF YOU CHANGE STATES FROM MINNESOTA- RECOMMENDATION:   Stay out of Minnesota (well) over half the year.  OVERDO residency changes related to intent factors!  Keep excellent records!  If you receive a residency audit notice from Minnesota, we recommend you retain a Minnesota tax attorney.

Summertime is a good time to refresh gift planning ideas

Charitable Trusts

As interest rates change, certain types of trust gift planning change.
Charitable Remainder Annuity Trusts: These trusts pay an annuity to the donor or another person for a set term, with the remainder going to a charity.  The donor gets an up-front deduction for the value of the charities remainder interest, which is larger when a higher interest rate is used.
Charitable Lead Annuity Trusts:  These trusts pay an annuity to a charity for a set term, with the remainder passing to the donor or someone such as a family member.  The donor gets to claim an up-front deduction for the present value of the charities annuity interest, which decreases as interest rates rise. Grantor-retained annuity trusts, where the person who sets up the trust gets an annuity for a set term are also hurt by higher rates.  Any balance left after the term expires goes to whoever the grantor originally named. Higher rates boost the potential gift tax bill.

Other Gifting Strategies

Do not waste the annual gift tax exclusion of $14,000: 
You can give up to $14,000 each to a child, grandchild or other person free of gift tax and it does not count against your “life-time” exemption.  If you’re married, your spouse also can give $14,000, doubling the tax free amount.
The 2014 “life-time” estate and gift tax exemption is $5,340,000.  You will not owe any gift tax on gifts over $14,000 as long as you do not use up your $5.34M exemption.
Pay a Donee’s tuition or medical costs directly:
The payments made directly to the educational institution or medical facility do not count against the $14,000 annual gift tax exclusion.
Give Appreciated Assets When Donating to Charity:
The appreciation escapes capital gains tax and you get to deduct the full value if you’ve owned the asset for over a year.
Keep Receipts and Records for Personal Property Donations:
Donations of gently used household items, clothing, furniture, etc. can add up to a substantial sum.  Keep a list of the items donated and note the condition of the item (e.g. excellent, good, fair).   An acceptable value for most items donated is 15% to 25% (or more) of the original cost.

Tom's Tax Tips: Stretch IRAs

What is a Stretch IRA?

A stretch IRA refers to an individual retirement account that is inherited by a beneficiary who is eligible to take the required minimum distributions from the account over the beneficiary's own life expectancy. This includes any type of individual beneficiary such as children, grandchildren, nieces, nephews, even friends, but not charitable beneficiaries since they do not have a life expectancy. It also does not apply to surviving spouses, who can simply elect to take an IRA inherited from a deceased spouse and roll it over into their own IRA.

Benefits of a Stretch IRA

The advantage of stretch IRAs from an estate planning perspective is that if a grandparent leaves the IRA to a grandchild or grandchildren, then the IRA can continue to grow tax-free for the benefit of the grandchildren since the grandchild's life expectancy will require the grandchild to withdraw relatively small required minimum distributions over many years leaving the principal and much of the tax-free growth inside the IRA.

Need for a Will

A will is important because if you do not designate who will inherit your property, a state statute will. The statutory distribution scheme (known as “intestate distribution”) will often provide for results differing from your wishes. If you have property in several states, the rules in each state may be different concerning who will be entitled to your properties.

Typically, intestate law divides the decedent's estate between the surviving spouse and living children; however, many people are surprised by the actual division made by state law. Even if the decedent does not have children, the spouse may not inherit the entire estate.

Perhaps most importantly for those of you with minor children, a will gives you the opportunity to designate a guardian for your children if your spouse does not survive you. You have better understanding than a court as to who of your relatives or friends will best be able to care for your children, both emotionally and financially. Your will can put this designation in place, identifying the best person for each type of function.

Moreover, because your children are minors, the court will require a fiduciary (e.g., a guardian or trustee) to be appointed to receive and manage that property the children inherit. This can be a cumbersome and expensive process, requiring court supervision throughout the time the children are minors.

A will can also simplify the probate process for your survivors. For example, you can designate a personal representative (also known as an executor) to handle the transfer of properties in your estate. You can direct how taxes and debts should be paid. You can waive state limitations on funeral expenses payable from your estate and enable your estate to take maximum advantage of estate tax savings.

We do hope that this explanation is a sufficient beginning to enable you to understand the practical necessity of having a Last Will.

Please contact one of our Wealth Advocates at Wade Financial Group to arrange an appointment to discuss this matter in more detail.