Michiganders who spend winters in sunny Florida often ask two fundamental legal questions: Should I change my legal residence from Michigan to Florida? What’s involved in making a change in my state of residence?
Neither question has a simple, quick answer. However, understanding the implications of changing your state of residence and knowing how a change is accomplished provide a good starting point for considering whether the change is in your best interests.
Why Your State of Residence Matters
As a snowbird, you have more than one residence — you live part of the year in Michigan and the other part in Florida. You know that various laws of each state apply when you are living there. From a legal standpoint, however, you have only one permanent legal residence or home, which is your domicile.
The laws of your domicile impact you financially and legally in a number of ways. Michigan and Florida laws differ substantially in many regards, including state income tax, real estate tax exemptions, and powers of attorney.
Income Tax
Michigan has a state income tax, which you pay on earned and unearned income if Michigan is your domicile. Florida, in comparison, does not have a state income tax. If Florida is your domicile, you will not pay tax on income you earn in Florida. (You may, however, still pay Michigan tax on income you earn in Michigan.) Your unearned income — retirement benefits, interest, and dividends — also is not taxed if Florida is your permanent legal residence and domicile.
Real Property Tax Exemption
If Michigan is your legal residence, you have a principal residence tax exemption, which exempts your home from local school district taxes. Florida has a homestead tax exemption for its legal residents, which can provide a property tax valuation exemption up to $50,000, as well as protection from valuation increases under the Florida Save Our Homes law.
In both states, only permanent legal residents are entitled to the real estate tax exemption. Laws in Michigan and Florida provide that a person claiming the exemption cannot also claim a similar exemption in another state. You can only claim an exemption if the state is your permanent legal residence and domicile.
Estates and Powers of Attorney
Florida has constitutional and statutory homestead protections that apply to the personal residence of individuals domiciled in the state. The laws protect your residence from creditors. They also guarantee your spouse a statutory share of your estate. When you are considering a change of domicile to Florida, you need to be aware that these provisions can affect your overall estate plan. If you change domicile from Michigan to Florida, it is essential to have your estate plan reviewed and updated to reflect Florida laws.
Michigan and Florida do not have an estate tax, but probate considerations are relevant to domicile changes. The only way to ensure that the full impact of a domicile change on your estate and your estate plan are taken into account is to consult with an experienced estate planning attorney knowledgeable about the laws of both states.
Florida has specific laws relating to powers of attorney, including advance healthcare directives. Even if you don’t change your domicile, it’s important to discuss your financial and healthcare documents with your estate planning attorney, to make sure your documents fully protect you in both Florida and Michigan.
How Domicile Is Determined
For legal purposes, there are many factors that affect a determination of domicile. The location of your primary residence is an important element. Your intention — as expressed through your conduct — is also significant.
Both Michigan and Florida have laws for determining domicile for different situations, such as income and real property tax. One consistent requirement is that you spend more than half a year — 183 days, to be exact — in your state of domicile each year.
There is no single piece of paper that you can sign to change your domicile from Michigan to Florida. Rather, your intent is expressed through your conduct and by specific steps you take to indicate which state is your legal residence.
The following list includes examples of actions that will indicate your intent to have Florida be your permanent legal residence and domicile. The list is not comprehensive or mandatory. You can signify your intent to establish Florida as your domicile if you:
- Spend more than 183 days of the year in Florida
- Own a residence in Florida
- File a Declaration of Domicile in Florida circuit court in the county of your residence
- File for a homestead tax exemption in Florida and rescind your claim for a Michigan principal residence exemption
- Apply for the Florida Save Our Homes tax benefit
- Update your estate plan and powers of attorney to accord with Florida laws, as well as address any potential Michigan probate issues
- File your federal tax returns with Florida as your residence
- Have a Florida driver’s license and car registration
- Set up bank and brokerage accounts in Florida or change the addresses to Florida
- Register to vote in Florida
- Change your address on your passport and credit cards
- Maintain memberships in religious and social organizations in Florida, rather than Michigan
Our Trusted Estate Planning Lawyers at BRMM Are Here to Help
Deciding whether to change your legal residence is a significant, complex decision. Our BRMM lawyersassist clients with interests in both Michigan and Florida and are here to help you and your family evaluate your options. We will talk with you about your individual circumstances and concerns, explain all the relevant legal issues, and guide you through the decision-making process. We will also help with implementing the domicile change if you decide that is the best course for you to pursue.
We have been serving clients in southeastern Michigan since 1970s. Call us at (248) 213-9514 or complete our online form to set up a free initial consultation.