Retirement Living In Two Locations

Living in more than one place during retirement can be an exciting and fulfilling experience, but it also comes with its own set of challenges and considerations. Here, we explore the legal issues that retirees should keep in mind when planning to split their time between Maryland and another state.

One of the most common questions clients ask us during an estate planning meeting is how their estate plan is affected by a move to a different state. The answer is that their documents should be reviewed by an attorney in the state where they move. We know that Florida has special requirements for a notary on the will, required homestead language in a trust, and a prohibition against a “springing” power of attorney for financial affairs.

Other states have their own nuisances. If you are depending on Maryland statutory form powers of attorney and health care directives, you could run into obstacles in getting the documents accepted even though the full faith and credit clause of the Constitution requires the acceptance.

The initial question leads to the next question of how to become a resident of a different state and avoid paying Maryland income taxes. The simple answer is that you must change your domicile, the place where you intend to remain indefinitely without any intention of leaving. Maryland, like most states, requires that you show that intent by action. Most of our clients are familiar with the actions such as spending at least 183 days per year in the new domicile, registering to vote, and getting new drivers’ licenses.

In one recent decision, the tax court sided with the taxpayer’s move to Texas from New York because he registered his dog in Texas. An older decision went against a taxpayer who claimed Florida residence while he obtained a hunting license as a New York resident. As you can see, the decisions are very fact-specific, and taxpayers must keep good records to show their intent to abandon their former domicile.

Changing your domicile to another state while retaining your Maryland home adds another factor to the difficult decision. The Maryland home is no longer eligible to the homestead exemption and Maryland tax withholding is due on the sale of the property for the nonresident. Maryland-sourced income is taxable to non-residents even if they live in another state. This is another factor to consider if you plan to work remotely or have a Maryland business. Probate may be required in two states where you own property in both places.

In addition to all of the legal issues of spending retirement in two locations, there are more important factors when making a decision about the costs of maintaining two homes: travel costs, medical care, family ties and friendships. The decision should include input from your family, financial advisor, certified public accountant (CPA) and attorney. Every situation is unique and requires a thoughtful plan.

Steven Berger is the founding attorney and a board-certified estate planning law specialist at the Law Office of Steven M. Berger LLC.

These answers are general information and are not intended as legal advice for your individual situation. The Law Office of Steven M. Berger LLC is located at 821 West Benfield Road, Suite 1, in Severna Park and can be reached at 410-777-5916 or admin@bergerwills.com.