INDUSTRY INSIGHT
Legal Advice for Snowbirds
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The Legal Plight of the
Florida Snowbird
E
ach winter a large number of people living in this area as well as
other areas in the northeastern United States descend on Florida to
exchange the cold winters and snow for the warm sunshine of Florida.
When last I checked, there were nearly 7,000 people with a residence in
Florida and western Pennsylvania.
When a snowbird passes away, there is often an inquiry made as to
the location of that person’s “home.” This is important for tax purposes.
Florida has no state income tax. Nor does the state have an inheritance
tax. In addition, there is a provision in Florida’s Constitution called the
“Homestead” provision. Coverage of what homestead is and is not would
entail along scholarly dissertation. For purposes of this article, I will be
brief. Florida’s homestead laws:
a) Prevent the homestead from forced sale by any unsecured creditor;
b) Prohibit any local taxing authority from increasing the real estate taxes
on one’s homestead by more than 3% per year; and
c) Allow one to pass on his or her homestead to certain legal heirs outside
of formal probate and without being subjected to any claims of creditors.
In most states, if an elderly individual goes into a nursing home for
long term care, and receives Medicaid, his/her home will be subject to the
Estate Recovery program. This program gives the state a high priority claim
to recoup the funds paid by the Medicaid program.
The amount owed can be substantial and most people end up with the
estate selling the home and paying the proceeds to the Medicaid agency.
If the deceased person is a Floridian, there is no legal claim to the home. If
the Florida home is a second home, there is a claim. The exemption applies
to the homestead only.
This law is extremely powerful. Consider the case of a lady who passed
away with her home in Florida and $100,000 in debts. Under Florida law,
the home would pass to her children and the debts, unfortunately, would
not be paid.
The legal term that states where one’s “home” is located is called
domicile. A person may have two or more residences. You may have a
house in Florida and another house in Pennsylvania. When you pass away,
does your family pay inheritance taxes? While you are living, do you pay
state income taxes? A residence is where you have a physical presence.
But your domicile is where your home is located. Far too often people
think that they have to live in Florida for six months or longer and that
makes them Floridians. It’s not enough. While it is true that you have to be
physically present for 183 days or more, there is no good way of gauging
how many days someone spent at a location.
To be a Floridian, you must be registered to vote there, claim a
homestead exemption on your taxes, have your driver’s license from
Florida, file your federal income taxes listing Florida as your home, having
your Will and other Estate Planning documents state that you live in
Florida, etc. These are examples of what lawyers call a factual inquiry. I
also strongly suggest that, in addition to the above, you communicate your
change of domicile to the taxing authorities in Pennsylvania.
There can be a considerable difference in tax es between the two states.
A person who dies with a $2,000,000 estate in Pennsylvania would pay
between $90,000 and $300,000 in inheritance taxes. The same estate in
Florida would be $0. As you can see, the taxing authorities in Pennsylvania
have a great interest in making certain that someone is truly a Floridian and
not simply someone trying to evade the “taxman.”
While there may be the homestead law, no inheritance taxes and no
state income taxes, there are downsides to Florida. The cost of living is
higher. Insurance of all types can be much higher. The summers can be hot,
wet and have an occasional hurricane. It also has sales taxes on many things
that Pennsylvania does not, including many foods.
Another consideration is your health insurance and primary physician.
Many snowbirds have learned the importance of having the right type of
insurance if you are splitting your time between two states. For an older
person who is on Medicare, it might make more sense to have a Medicare
Supplement rather than an HMO/PPO style policy.
Finally, there is nowhere more important to declare your home than in
your Estate Plan. If you are a Pennsylvanian or a Floridian, say so in your
Will. Contact your estate attorney.
Carl Zacharia is a partner at Zacharia & Brown PC. His
practice focuses on assisting families in dealing with the
legal and financial issues associated with the costs of
long-term and nursing home care. Zacharia & Brown is one
of the oldest, most established elder law firms in western
Pennsylvania. Its practice includes life care planning for
seniors, elder law, Medicaid & veterans benefits eligibility,
nursing home asset protection, care review and advocacy,
and estate planning and administration. Contact information:
www.PittsburghElderLaw.com, 724.942.6200.
111 West McMurray Rd., McMurray, PA 15317.
50 724.942.0940 TO ADVERTISE | Peters Township