Do you live in one state for part of the year and another the rest of the time? Maybe you head south for the winter like many “snowbirds,” or spend your summers in a vacation home up north. If you own property in two different states, you're what we call a
double-state dweller—and you could face some unique financial planning challenges.
For example, say you spend most of the year in Michigan but winter in Florida. Michigan has a state income tax, while Florida does not. If both states consider you a resident, you could get hit with unexpected tax bills—or even face probate proceedings in both states if you pass away.
The good news? With smart strategies and professional guidance, most of these issues can be managed or even avoided altogether.
Here are some of the key financial concerns to consider:
Permanent residency confusion
If you own a vacation home in another state, you probably consider one state your “home,” and the other state just a place you like to visit. However, the governments of those two states may look at it differently. Depending on whether or not these states deem you a resident, you could pay a hefty price.
First and foremost, you need to determine whether you are considered a resident of both states. Generally, if you spend more than 183 days in a state, that state is more likely to see you as a permanent resident. However, this is just a simple rule of thumb. When it comes to financial planning, things can get much more complicated.
If you want to more strongly establish your permanent residency in a particular state, you should register to vote there, keep your driver’s license and car registration in your main state, and set up your financial accounts with banks and brokerages in your home state. You should also hold on to any financial records that document your residency and keep receipts that show where you are living during a certain time of year.
Probate problems
If you own property in more than one state, your estate could be subject to probate in both states. This means your heirs could be heavily taxed after you die, and they may not receive as big of an inheritance as you had hoped.
To help resolve probate issues, many financial experts say you should place any property you own in a second “nonresident” state, such as a vacation home or condo, into a revocable trust. This ensures the property will be passed onto your beneficiaries free of probate.
Health insurance complications
People who own property in two states should also take a close look at their health insurance coverage. Generally, health care plans cover only a specific geographic area. Therefore, if you split your time between Maine and North Carolina, you may need to purchase two health care policies to make sure you are covered in both states.
Alternatively, you could switch to a different type of health care policy. For example, if you have an HMO (health maintenance organization), your insurance likely won't cover medical costs if you visit a doctor outside of your network. However, if you switch to a PPO (preferred provider organization), your health insurance will cover at least a portion of the costs if you go out-of-network.
Homeowner's insurance issues
You should also review your homeowner's insurance coverage if you spend considerable time in another state. Your coverage may change if you leave your home unoccupied for a long amount of time. Additionally, if you’re renting a home or condo in another state, you will need to purchase renter’s insurance to protect your personal items inside the home.
Bottom Line
Living in two states has its perks—but it also comes with some complex financial questions. From taxes and residency rules to health coverage and insurance protection, there's a lot to keep track of.
Working with a knowledgeable
financial or insurance advisor can help you navigate these challenges, avoid costly mistakes, and enjoy your dual-state lifestyle with peace of mind.
Ready to review your current coverage or estate planning needs? We’re here to help.
