Kiplinger’s recent article, “5 Financial Matters to Consider When Moving to a New State,” provides some tips to help make the financial transition as smooth as possible and avoid the unexpected.
Income Tax. Consider the state’s income tax structure. If you’re moving to a state with a higher income tax rate, if you have some advance notice, you may want to recognize some income before you move. Examples include income from capital gains in your portfolio or exercise of stock options. Some states have recapture rules you’ll need to know. If you’re moving to a state with a higher tax rate, your take-home paycheck may be lower than you anticipated. Do the calculations prior to signing your relocation and cost of living adjustment package. You may want to think about asking for a higher salary to keep up with your projected after-tax living expenses. Also, there are property and sales taxes which are usually higher in states that don't have an income tax.
Estate Plan. Update your will, as estate tax and probate laws will vary from state to state. If you own out-of-state property, like your former residence, that you want to keep or rent out, speak with an estate planning attorney about creating a revocable trust or a limited liability company to avoid taxes. Likewise, check your financial and healthcare powers of attorney—these are based on state statutes that are different in each state.
Cost of Living. A big factor in a relocation package from the company is quantifying how much more housing and recreation may cost. If you have children, be sure to look at the school system and whether you want your children enrolled in private school. Tuition can be a big budget item for any family, and if you've never had to pay it in the past, you’ll need to plan ahead. Education expenses may influence where you live in the new city or town, as well as the amount of house you buy and the mortgage payment. These cash flow issues need to be in sync with your lifestyle expenses to avoid throwing a wrench in your long-term financial plans.
Investments. Your investment strategy may also need a review. Some states exempt a portion of your capital gains from income tax, and dividends aren’t taxed in Nevada (a no income tax state).
Moving to a new state can be an exciting experience, but be sure it’s a sound financial move, too. While you are at it, if your current estate planning attorney is not admitted to practice law in your new state, be sure to ask for a referral to a qualified estate planning attorney in your new state.
Reference: Kiplinger (October 2016) “5 Financial Matters to Consider When Moving to a New State”