Now is a great time to become a Florida resident
Ever thought of becoming a Florida resident? There are many great reasons…the weather….great beaches….golf courses galore…Disney…and favorable laws. Yes, favorable laws. Especially when it comes to taxes and asset protection.
Florida has no income, estate, inheritance, gift, intangibles or generation-skipping tax. (The intangibles tax was repealed back in 2007.) Most states, but not all, impose at least one of the above taxes on its residents. It has become increasingly more common for states to repeal their state estate taxes on their residents but some still tax the property of residents of other sate. Some taxes Florida does impose are business, sales and real estate taxes. Florida’s legislature has allowed a “tax holiday” in the past on back to school items and hurricane preparedness items to help out Florida residents.
The second reason to become a Florida resident is that Florida has favorable asset protection laws to protect its residents. The most widely used asset protection technique is the homestead. Only a few states even recognize some sort of homestead protection to protect ones home from a forced sale (subject to some exceptions in Florida such as mortgage holders and mechanic lien holders). In order to qualify for the homestead exemption, you must 1) intend to permanently reside in Florida; 2) have legal or beneficial title in equity to the real property on the 1st of January; 3) reside on the property; and 4) in good faith make the property their personal residence. There are land limitations on the homestead though. If the land is within a municipality, the protection is limited to one-half. If located outside a municipality, then the limitation is to 160 contiguous acres. Further, due to the Bankruptcy Act of 2005, for the first 1,215 days your own your homestead, you only have a limited homestead exemption. This prevents someone from moving to Florida, putting all their money into their homestead and then filing bankruptcy.
Life insurance proceeds are also exempt from the creditors of the insured unless the policy or a valid assignment provides otherwise. (This does not mean that the life insurance proceeds are exempt from the creditors of the beneficiary once the beneficiary has the death benefit in their hands) The cash surrender value of insurance policies insuring the life of a Florida resident and the proceeds of an annuity contract issued to a Florida resident are exempt from the reach of creditors. Assets, including cash, payable from a qualified retirement or profit-sharing plan are exempt from claim of creditors of the beneficiary and participant. Further, once a participant in a qualified plan passes away, the inherited qualified plan is also asset protected from the claims of the beneficiary’s creditors. Assets set aside in a medical saving account, college trust fund or 529 plans are protected from creditors. Finally, assets titled as tenants by the entirety, which is only available to husband and wife, are exempt from the creditors of one spouse. If the creditor is a creditor of both spouses, this protection does not exist.
Becoming a Florida resident is easy as Florida is an intent state, meaning if you intend to be a Florida resident, then you can be. The bigger problem is having the state you have left no longer claim you as a resident. A few simple steps can allow you to show your intent and hopefully break any connection you may have with your old state of residency. All of Florida’s exemptions may be found in Chapter 222 of the Florida Statutes.
To learn more about becoming a Florida resident or ensure you are treated as a Florida resident, please consult our estate planning attorney at Wood, Atter and Wolf, P.A. located in Jacksonville and Ponte Vedra Beach, Florida.
