Taxed Enough? Looking at Leaving NJ? Domicile and Residency are Key Questions
It seems that my in box is full of information on better places to live than New Jersey from a cost perspective (personally, I love the shore and NYC and Philly and skiing all being within 2 hours drive). I got a very thoughtful piece from my friends at RegentAtlantic Capital entitled "When You've Paid New Jersey Enough". In the article, Bill T. Knox, "reviews the key factors that should determine whether someone who has lived in NJ and then establishes a home outside the state will be successful in escaping the state’s income and death taxes."
Bill looks at New Jersey domicile and residency from the income tax and estate and inheritance tax perspective. Domicile is a very tricky question - it is where you intend to be without intending to move. So if you intend to be an Florida resident, but keep your New Jersey home and all your bills coming here, did you really leave New Jersey domicile?
And why does domicile matter? Well, New Jersey income tax applies to all income earned by New Jersey "residents", and the New Jersey Estate tax is levied against a New Jersey resident who dies. Clearly, if there is a question, New Jersey would like to claim that you live here and you should pay here. So, if your domicile and residency are supposed to be elsewhere, you need to make sure that you have dotted all "i's" and crossed all "t's" to make that happen.
Quick story - A client of mine died January 1, 2009. She had changed her residency and domicile to North Carolina in the year before her death. Her estate is approximately $3.5 million. Had she dies a New Jersey resident she would have owed New Jersey approximately $230,000. As a North Carolina resident, her estate tax bill is $0.00. How is that for some effective Estate Planning???
In "When You've Paid New Jersey Enough" Bill provides a quick checklist of key domicile and residence issues.
It is no secret that New Jersey is the most expensive state to die in. New Jersey has the lowest estate tax exemption threshold of the country at a mere $675,000. In contrast, Florida has no state-level estate tax, and the creation of an estate tax is specifically banned by its Constitution. in addition, Florida's state revenues are generated primarily from property tax and sales tax. Due to all of these things, Florida is a less expensive State to live and die in New Jersey. For years we've been recommending to clients who have homes in both New Jersey and Florida to consider changing their residency of Florida.
