How to Establish a New State Residency

[foodsman]

Hi folks,

It seems from what I’ve read There are some things to consider regarding establishing a new residency. Here's what I understand so far...

• Consider Setting up an LLC in Montana where there is no sales tax and reasonable plate fees.
• Setting up state residency (from a drivers license standpoint etc) in Florida, South Dakota or Texas. We currently live in North Carolina.

If the way we travel may influence the above it may be helpful to know that my wife and I are retired and plan to be full timers. We would spend summers primarily in Colorado, Wyoming and Montana and winters in Florida where we have kids and grandkids.

Just wanted to see from those who are full timers (notice I said Full Timers and old timers) if you would have additional information for us to consider?

Thanks,

Harry

[Jim2]

The Montana LLC thing is really not related to establishing your new domicile for fulltiming. Its just a tax avoidance gimmick used by some whether they are fulltime or part time.

How to change your domicile summary:
- pick a state, most use SD, TX or FL
- pick a professional mail forwarding service within your chosen state
- about 3-6 months before going fulltime, begin to gradually transfer all your personal accounts & correspondence contacts to the new address
- get rid of everything you wont be taking with you on the road
- just before taking off transfer your vehicle registrations to the new state (usually with the help of your mail forwarding service)
- transfer all your insurance to the new state & new address (for some this includes obtaining new medical insurance also)
- if applicable transfer/re-write your estate plan, will, living trust, power of attorney, & similar type docs to comply with your new states laws & requirements
- cancel, close or transfer all your remaining ties to the old state and physically move out of the old state. file a change of address with the PO for any mail that shows up at the old address. If applicable plan for filing the final state income tax return to the old state when required.
- plan your in person visit to the new state to get your new drivers license, voter registration and anything else needed to complete your "move"

you can find more details online at the mail forwarding service sites for each state

you asked if how you travel effects this choice of state; No it doesn't really matter how or where you travel, You could pick Fl for a domicile but spend all your time traveling around the Pacific Northwest. Other than one initial visit to get your new drivers license, you never have to step foot inside your new state, until that DL need renewed. The only caution I would add is that you need to be careful not to spend more than 180 days (6 months) continuous in the same state, or you could void your chosen domicile and automatically be claimed as a resident of that state.

I'm not sure if you were looking for recommendations as to which state?
There are some minor differences between SD, TX & FL. I chose SD and am still happy with that choice after 6 yrs. But many others choose TX or Fl and are happy with those choices. Other than the basic taxes, fees, insurance costs; there are also many legal details that vary by state. There is also some personal preference involved in this choice.

SD tax on vehicles is 3% where TX & Fl are around 6%
If you are not yet Medicare age or covered by other Med insurance, SD has very limited choices of private med insurance plans, that allow coverage outside the state.
If your RV rig is over 26000 lb Tx requires you take an extra written & driving test for Class A lic. Tx also requires vehicle inspections, but used to waive it until you actually drove back into Tx; that may be changing to an annual requirement as part of registration renewal.
I didn't seriously consider Fl, so don't have any details for it, but ask any specifics here and someone will reply.

[RickO]

Jim2 has some great advice.

The LLC is an issue separate and apart from establishing residency in a new state. Whatever you choose, make sure you do it right and don't have one foot still planted in your old state and another in your new state. Make a clean break.

Best of luck.

Rick

[foodsman]

Thanks Jim2,

That was very well considered and I appreciate it very much. I think the two states that stand out best to me is South Dakota and Florida.

I know in SD you have to go back every 5 years for your DL. In Florida the DL is for 8 years and you can mail in and be renewed for the next 8. So after 16 years you have to show up in person which isn't that bad.

Texas will mail your license indefinitely as I understand. But I don't like the inspection or requiring a different class of license and the testing.

Thanks again for your help,

Harry

[foodsman]

Hi RickO,

You said: The LLC is an issue separate and apart from establishing residency

Yes this is a separate issue and I know of two companies in Montana offering the service to generate the LLC. They are "Deer Creek and Montana RV", I don't know if its best to use one of them or go through a lawyer but I understand its a straight forward thing to do.

Thanks,

Harry

[missourijan]

I believe the SD legislature changed the rules on driver's licenses last year. If you have a clean record you can renew your driver's license for another 5 years online or by mail. So, you don't have to return for 10 years. We also spend time in MT almost every year and SD is just next door!

[foodsman]

That is great news on SD... Thanks

[Xanso]

TX requires a special license to operate a RV above 26k lbs. it's both written and a road test. They now require annual inspections. Montana, LLCs are going the way of the dodo, states are cracking down, you could face a fine and even jail time.

[BCooke]

Originally Posted by missourijan

I believe the SD legislature changed the rules on driver's licenses last year. If you have a clean record you can renew your driver's license for another 5 years online or by mail. So, you don't have to return for 10 years. We also spend time in MT almost every year and SD is just next door!

Oregon is similar, do not know the years as my parents are the 'residents'.

[foodsman]

Every state wants the tax from the purchase of a motorhome for sure. I've read that states have been putting pressure on Montana to change their laws but to date Montana has not budged.

As for "you could face a fine and even jail time", I can see the state where you set up as your "Full Timer" residency trying to come after you for taxes. But to face jail time I think is way over the top. First that state of resedency would have to pass a statute which is easier said than done. Then they would have to establish the fine/incarceration standards for it.

I understand a given state may not be happy about the loss of tax revenue but the Montana LLC is 100% legal. Some may choose the lesser of two evils and select a low tax state like the 3% in SD. But that does not change the Montana LLC is legal.

Lets also keep in mind there are untold thousands of corporations who register their company in Delaware for this very same reason. Again, the state they reside may not like it, but it is legal!

Just my thoughts and my many years of watching Perry Mason and Matlock...

Xanso, thanks for your information. I like Texas but your information would keep me out of choosing Texas as my residency. Hey maybe Texas will see "I ain't common and change the rules"! That could happen right?

Harry

[StevenNSteph]

Originally Posted by foodsman

I understand a given state may not be happy about the loss of tax revenue but the Montana LLC is 100% legal. Some may choose the lesser of two evils and select a low tax state like the 3% in SD. But that does not change the Montana LLC is legal.

Montana LLC's are legal but using a Montana LLC to evade sales tax is illegal and that is what every case has found. States are zealous for revenue and the Montana plate on a RV is a known tax dodge. There have been enough links given here on IRV2 to people who have gotten busted and prosecuted for this tax avoidance scheme so the original poster should be aware of that.

The main thing you have to understand is that the Montana tax dodge is about saving sales tax and personal property tax if you state charges that. If you already own a coach moving it to Montana doesn't make any sense, especially if you are going to set up a domicile in SD, FL or TX. All of those states offer very low plate fees and the cost of maintaing the LLC and the registered agent in Montana will be more than any savings you get that way.

If on the other hand you are purchasing an expensive coach and plan to full-time in it (moving it and not spending more than a few months in any one state per year) you can conceivably get away with this tax dogde. You will need to set up a Montana LLC before you purchase your coach. I suggest using INCFile or any other cheap web based business filing service to save money, they will also secure you a registered agent. You then need a bank account set up for the LLC.

Remember that it is the LLC which is purchasing your motorhome and you will need to keep the LLC active along with the yearly filings, minutes and pay for a registered agent every year. It's not expensive but plan on about $250 a year in fees so you need to be saving a considerable amount of sales tax for this to be worth it. You also have to understand that people have been caught and prosecuted for evading taxes and the fines are much more than you will ever save. The choice is yours but if you afford to buy a $500K coach you probably an afford the one time $15K sales tax that SD would charge and not worry about the yearly hassles with the LLC or the idea that if you get caught you could go to jail because you are committing a felony.

Steven

[foodsman]

Thanks Steven,

I must admit with your post that SD is looking better as a place of residency! Plus the idea of doing something that is flat out illegal, which I was unaware of, (thanks Perry Mason and Matlock) is not something I'd be interested in. Saving tax money is one thing, doing it iligeally is yet another!

My wife and I lived in Florida some 30 years before moving to Wyoming and now North Carolina. But SD seems like a better choice with everything considered!

Thanks for your stepping in and keeping me straight!

Harry

[bdickson]

Originally Posted by foodsman

I must admit with your post that SD is looking better as a place of residency!
Harry

We went full time 3 years ago, sold our house in NC and "moved" to South Dakota. We were required to pay SD sales tax on our MH, but they deducted the NC tax we had already paid, so the net outlay was a few hundred dollars. We flew to Rapid City, spent 1 night in a hotel, took the hotel bill and our NC drivers licenses to the DMV next day and 20 minutes later we were SD residents with drivers licenses, voters registration and SD tags. It really could not have been easier, especially since we had Americas Mailbox do the vehicle registrations for us. We have yet to find a downside to choosing SD as our state of residence.

[Bullitt]

Originally Posted by foodsman

Thanks Steven,

I must admit with your post that SD is looking better as a place of residency! Plus the idea of doing something that is flat out illegal, which I was unaware of, (thanks Perry Mason and Matlock) is not something I'd be interested in. Saving tax money is one thing, doing it iligeally is yet another!

How it works in California (I was a big city cop for 33 years): If you live in CA (drivers license, home, work, etc.) and have a Montana plate via LLC only for your motorhome, they consider it tax avoidance and will nail you for current and back taxes (including interest and fines).

The ONLY job of the California Highway Patrol, besides responding to traffic collisions, is to write citations. Normally how CA residents get caught is by having an RV Montana plate and towing their car or boat with a CA plate. There is no real quota system and they really don't think of the revenue tickets generate, CHP officers just like writing citations.

The other way to get caught is by having one of your friendly neighbors dime you out. The DMV or CHP will send investigators to your residence, discover your MH w/Montana plates in your RV parking and initiate an investigation. Which, depending on the cost of your MH, could net you tens of thousands in fines and back taxes.

One of the previous posters called it a scam, another said it was legal. Unless you have the coin to pay an attorney to fight the state on principals, is it worth the hassle? There are many states cracking down on Montana LLCs, not just CA (Google it).

Like BDickson, I plan to move to SD, use America's Mailbox, purchase a MH for full timing, and pay the low SD MH sales tax. It was nice that SD deducted the NC taxes for them when they moved there. I don't mind paying SD taxes because I'll have the privilege of living there while my wife and I full time it and not pay state taxes on our pension incomes.

Clancy