Moving to a different state for a new job or because your current employer has asked you to make a move raises many questions. Here are some of the key facts you’ll want to pin down.
When you and your family are faced with a move to a new state for work, the biggest question on everyone’s mind will be where will the family live. But the house is only the start of the questions you’ll need to answer before making any final decisions. This recent article from Kiplinger’s, “5 Financial Matters to Consider When Moving to a New State,” points out factors that you might not have thought about when preparing for relocation.
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).
Relocation can be exciting and nerve-wracking for everyone in the family. Going through these steps will help you determine the real cost of a move, and help you make informed decisions. Another important step: your estate plan will need to be revised to comply with the laws of your new home state. Ask your estate planning attorney for a referral to a qualified colleague.
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