Why Are the One Percent Moving to Florida?
Last week, the New York Times reported that Donald Trump had submitted paperwork to change his residency from New York to Florida. The President confirmed the news in a series of tweets, at first a little wistful (“I cherish New York, and the people of New York, and always will.”), followed by a familiar chaser of vitriol for one of his political rivals (“New York can never be great again under the current leadership of Governor Andrew Cuomo.”).
1600 Pennsylvania Avenue, the White House, is the place I have come to love and will stay for, hopefully, another 5 years as we MAKE AMERICA GREAT AGAIN, but my family and I will be making Palm Beach, Florida, our Permanent Residence. I cherish New York, and the people of.....— Donald J. Trump (@realDonaldTrump) November 1, 2019
The move has many potential implications for the 73-year-old Queens native. Town & Country asked Lee-ford Tritt, a law professor and member of the graduate tax faculty at the University of Florida College of Law, to walk us through how the move might affect the President's bottom line.
WHY WOULD SOMEONE LEAVE NEW YORK FOR FLORIDA?
“The tax implications will be huge for President Trump. He lives in Manhattan and is therefore subject to New York city tax and New York state tax. Florida does not have an income tax so he’ll probably save about 12 percent a year in taxes. Florida also does not have an estate tax which is huge because the estate tax in New York is about 16 percent for any amount over $5,750,000. So, between income tax and estate tax, he and his heirs are going to be saving a lot of money.”
HOW DO YOU DO IT?
“On the surface, changing residency is not hard. When a court is trying to establish residency, they look to see if you are actually leaving a state and if you are landing in another state. Typically, there are two tests, a domicile test, and a statutory residence test. For the domicile test, you're looking at the latter, in other words, the actions of the person moving. Florida has a declaration of domicile form, so you can come here and sign a document that declares that you're domiciled in the state of Florida, which helps you establish and show your intent. Typically you also change your driver's license, voter registration, and your mailing address.”
SOUNDS EASY. WHY DON’T WE ALL JUST “MOVE TO FLORIDA”?
“New York and other states with income taxes do not like to give up revenue and that’s where the statutory residence test comes in. New York State checks to see if you spent more than 183 days in New York after your move. It will literally check if you had flights that connected through LaGuardia or JFK and count those as days. And if you spend 183 days and one hour in the state, New York considers you a resident.”
States go much farther than just checking flight records.Last spring,a court decidedthat a man did not qualify as a Florida resident after a lawyer produced evidence that he checked into his gym in California on 300 days in the year he was supposedly living in Florida. States also assess where individuals with multiple dwellings keep their art collections and other prized possessions—the so-called Teddy Bear Test—and use that information to make judgements on residency.
THERE MUST BE WAYS TO PROVE I ACTUALLY MOVED
“In the old days, we would tell clients to write down where they were every day of the year in a print calendar so they could prove to investigators that they spent the majority of their time in their new domicile. Nowadays, you tell your clients to keep track of it on their smartphones.”
OKAY. I CAN DO 183 DAYS. ANYTHING ELSE?
“It’s a good idea to give up your country club membership and other affiliations in your old home state and join ones in your new one. But that’s complicated for wealthy people who own multiple homes and belong to numerous clubs. It might be even more complicated for President Trump because he owns country clubs.”
MY ACCOUNTANT ALREADY MAKES SURE I DON’T PAY A LOT OF TAXES. ANY OTHER REASON TO GO?
“Florida has something called Homestead Protection, which prevents you from being forced to sell your home to pay certain creditors.” (OJ Simpson, for example, was able to keep his Florida home after being ordered to pay $25 million in a wrongful death judgment in a lawsuit filed by the families of Nicole Brown Simpson and Ronald Goldman.) “There’s no monetary limit, so depending on how expensive that house is, you can save a lot of your money from bankruptcy or credit claims.” (Nowadays people looking to avoid potential creditors can also enlist legal advisors to set up offshore or domestic “asset protection trusts.”)
ONLY IN FLORIDA?
“Hardly, there’s no income tax in Texas as well and it has similar home protection laws. It really comes down to personal taste. Are you a Florida type or is Texas your style?”
Alaska, Nevada, South Dakota, Washington and Wyoming are five states that also do not levy personal income tax.
IS IT BAD FOR FLORIDA?
“In high-profile cases like this, people always say, ‘This seems so outrageous!’ but it is a very common move for wealthy and for older people. It’s old-school financial planning. People in my field would yawn if you mentioned it. Or say, ‘I'm surprised he hadn't done it sooner.’ Florida is able to generate revenue from tourism. And having wealthy people move to the state brings money to its service industries."
*This story originally appeared on Townandcountrymag.com
*Minor edits have been made by the Townandcountry.ph editors