With any luck, we here in Wisconsin will continue to enjoy a beautiful and temperate autumn. Yet, as those of us who stand ready to brave the harsh winter are checking the oil in our snowblowers, the snowbirds among us are servicing their cars and getting ready to “fly” south for the winter. Warmer climates beckon many Wisconsinites, and as they do, a number of considerations come to mind.
The first of these occurs to me as I just finished reading a New York State Tax Court case. The income tax authorities were making a claim that the other party in the case was still a New York resident. The other, a gentleman less than excited to find New York was not quite so willing to let him go, considered himself a Florida resident, at least for state income tax purposes.
The state of New York and the individual went round and round on all the facts and circumstances of his residency, but in the end, he lost the case and will pay taxes and penalties in the hundreds of thousands of dollars for failing to properly establish a Florida residence and abandon his New York tax domicile.
Your state of residence for purposes of income taxes (tax domicile) is a function of many things and not solely how much time you spend in one state or the other. The factors are many and vary from state to state.
Wisconsin uses its own set of factors for consideration, and the state to which you are traveling might also have a set of factors to be considered. Therein lies the rub. If you believe you are a resident of the state of Florida and no longer a resident of the state of Wisconsin, it is important not only that you comply with the rules in the state of Florida for establishing residence, but also understand what activities, if any, that you may still do in the state of Wisconsin part of the year that might cause the Wisconsin Department of Revenue to think you are a resident here.
In short, you need to understand two sets of rules.
An issue like this, falling between two states, also often falls between two offices: the attorney’s office and the accountant’s. It requires a coordination of the laws of both states applied to your facts, and coordination between your lawyer and your accountant with respect to being sure there is a clear understanding of domicile, full-year, part-year or not at all.
In addition to the tax domicile issues, estate planning issues exist. Your estate plan needs to be clearly coordinated with your state of residence. This might mean that if you use a Wisconsin power of attorney for health care and spend part of the year in Florida, you should also have a Florida version of that same document.
Wisconsin, as a marital property state, is different, from that perspective, from the laws of the state of Florida, or even Texas, New Mexico, Arizona, Nevada or any of the other common and popular “snowbird” states.
Integration of your estate plan and the laws of both states might be important for you. Your local counsel may need to work with other counsel licensed in those states to develop your plan and make it suitable for both.
In my case, a number of my partners are licensed in those states, so I frequently work with them on plans for individuals with ties to both.
So, before you slam the trunk lid shut, make sure you have copies of all your estate planning documents with you as you go, and consider having them checked over by counsel familiar with both Wisconsin and your destination state before the Wisconsin state line fades in your rear-view mirror.
If tax domicile is also at issue for you, the stakes are even higher.
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