Moving to a new state requires a review (and possible update) of your estate plan and other consideration.
Life has changed significantly since 2020.
People have lost or changed jobs.
Many have relocated for work.
Others simply have chosen to be closer to family or better weather.
This is especially true for those who are retired.
According to a recent Forbes article titled “Thinking of Retiring and Moving? Consider the Financial Implications First,” old estate plans and retirement plans are often insufficient for those moving to a new state.
Although the laws enacted by the federal government apply to all citizens of the United States, each state holds its own unique combination of laws applicable to its residents.
As a result, people who move should be cognizant of the differences.
What areas should those moving to a new state consider?
Income tax rates.
How a state taxes income is important information at any stage of life.
It is even more so during retirement when income is fixed.
Some states have a flat income rate for all people.
Other states have tiered income taxes based on the amount of income a person claims.
States like Alaska, Washington, Wyoming, South Dakota, Nevada, Texas, and Florida do not levy a state income tax.
In addition to the tax rate, you should also consider how specific assets are taxed.
Some states do not treat retirement income, pension income, and Social Security income like other income sources for tax purposes.
Others treat them just like traditional income.
Housing does not cost the same in every state or city.
When moving to a new state, people should review the averaging housing costs.
This does not simply include the purchase price of the home.
It also includes insurance, property taxes, and house maintenance.
At 7.5 percent, California wins the title of state with the highest sales tax.
Indiana, Mississippi, New Jersey, Rhode Island, and Tennessee each have rates of 7 percent.
On the other end of the spectrum are states like Alaska, Delaware, Montana, New Hampshire, and Oregon with no sales tax.
Reviewing the county and city sales taxes is equally valuable when moving to a new state.
The financial health of the state.
If you rely on a pension, you should review how well the state is able to provide payments for these.
Alaska, Connecticut, Hawaii, Illinois, and New Jersey have the greatest amounts of unfunded pensions debts.
When moving to one of these states, you may face an increase in taxes in the future to cover the financial obligations of these states.
The overall cost of living.
Some states are more expensive to reside in than others.
Your budget for food, transportation, and healthcare costs may rise significantly if you move to a new state.
Account for the adjustments prior to your move.
Estate planning considerations.
States do not have universal tax and estate planning laws.
Moving to a new state may cause you to be subject to additional gift or estate taxes.
It is important to work with an experienced estate planning attorney in your new state to ensure your plans satisfy the requirements specific to the state.
Reference: Forbes (Nov. 30, 2021) “Thinking of Retiring and Moving? Consider the Financial Implications First”