Change Your Tax Status by Changing Your Domicile Ep #74

Are you familiar with the term “State of domicile?” You’ll be hearing it more and more as our world becomes more and more digitally connected and people become more mobile. Retirees should especially pay attention to the issue because it could save them thousands of dollars. If you’re interested in possibly changing your state of domicile in the future, either to enjoy better weather or to change your financial picture, this episode will be very helpful.

And in the retirement headlines I’m going to chat a bit about the one item you could invest in that has historically proven to be a better investment than gold and many other commonly traded commodities. What is it? Listen to find out.

Changing your State of #domicile could give you #financial perks during #retirement. Listen to this episode of #RetirementStartsToday to find out how. #RetirementPocast #RetirementPlanning Click To Tweet

Outline of This Episode

[1:23] Retirement headlines
- VOX article: How the value of Legos has outpaced gold historically
- What can we learn from this Legos situation about supply and demand?
- What can we learn about cryptocurrency and other speculative investments?
[7:58] How domicile a different state could be advantageous during retirement
[10:52] How you can legally change your domicile.
[13:07] Some states implement an estate tax. Watch out!
[15:25] Ways you can prove your state of domicile
[18:26] You also need to sever ties in your previous state of residence

What lessons can we learn from the way Legos increase in value over time?

Legos are an amazingly high-value item and possible speculative investment opportunity. Amazingly, you can find collectable, limited-edition sets of legos that sell for tens of thousands of dollars on eBay and other online marketplaces. Why are they so valuable – even more so than other consumer fads like Beanie Babies? I’m not entirely sure, though I have my theories. But more importantly, what can we learn from the valuation of Legos over time?

First, there is a clear lesson about the way supply and demand works. The Lego corporation closes out the production of sets intentionally after a while. That creates scarcity in a very real way, which in time can drive the demand for that particular set higher. But there’s also the issue of popularity and trends that inform valuation and demand, which is not so easy to pin down.

We can also see from this example that a speculative approach to investing is exactly that. It’s hard to predict when and how this kind of increase in value will happen. It’s based on a hunch, though sometimes an educated one. I personally wonder how this will play out in modern-day opportunities like cryptocurrency?

The place you live can give you great financial advantages or disadvantages

We all know that the place we live can have very clear financial advantages or disadvantages. The cost of living where we live is one issue that bears this out – it’s cheaper to live in places like Arkansas than it is in California. But there’s also the issue of taxation. States like New Jersey are historically high taxation States, which makes living there a difficult thing if local salaries don’t keep pace with the tax burden citizens are required to carry.

Your State of domicile could be an issue you want to consider as you face retirement. Many retirees move to warmer climes or less expensive places to live once their career is wrapped up. When making that decision, it’s smart to consider the financial side of things to enable you to enjoy your retirement better by stretching your hard-earned dollars.

The place you live can give you great #financial advantages or disadvantages during #retirement. Listen to this episode of #RetirementStartsToday to find out more. #RetirementPocast #RetirementPlanning Click To Tweet

The state where you legally domicile can impact estate taxes, retirement taxation, and more

Some States in the union levy an estate tax on top of federal estate taxes. Naturally, if you’ve got a sizeable estate to consider you’ll want to steer clear of those locations as your State of Domicile if at all possible. Some States tax retirement income differently than regular income, to your advantage. Do you know what States those are? If not, it’s something to look into (and there’s an article link in the show notes for this episode that is a good place to start your research).

You’ll also want to consider the cost of living in States if you’re considering a retirement move. How high are insurance rates, annual vehicle registration fees, and does the state you’re considering have State taxes at all? Listen to this episode and you’ll get an overview of what a move could mean for you. I’ll also cover some of the things you need to do in order to prove a new State of Domicile to the IRS and other entities of concern.

Things you can use as proof of a new domicile

Proving your State of Domicile isn’t as easy as packing up and moving to your summer home. You need to think a bit farther down the line to consider the things you’d typically do if you were to permanently move to a new location. Changing your driver’s license, vehicle registration, insurance policies – even bank accounts can be verifiable ways to prove a change of domicile. Also consider changing things like health club memberships, church memberships, etc. One man was able to prove his change in domicile by documenting where his dog was kept most of the time. Wow, that’s what I call a “really good boy!”

Listen to hear all my pointers and to hear how you can find more resources for making a domicile change effectively and legally.

Here are a handful of things you can use as proof of a new State of #domicile. Listen to this episode of #RetirementStartsToday to find out. #RetirementPocast #RetirementPlanning Click To Tweet