Financial Planning Tips for Snowbirds

Fall 2013

Thanks to the ease of air travel and increased ability to work remotely, growing numbers of people are escaping harsh winters and setting up second homes in southern and south western states.

According to studies from Arizona State University and the University of Florida, each winter, more than 1 million people flock to Florida and Arizona, two of the more popular warm-weather destinations. These so-called snowbirds or snowflakes — those who float back and forth between homes based on the season — have much more to consider than where they lay their beach towels or their next tee time.

If you decide to split time between two states, you’ll need to keep your properties secure while you’re away, understand tax implications and organize your finances. Here are five tips that might help:

1.Try out the trip.

Before renting or purchasing a second home in a warm-weather state, practice traveling there to make sure the trip is convenient. “The first thing you need to think about is the ease of getting to your second home,” says Heidi Steiger, President of the Eastern Region of The Private Client Reserve.

If you’re constantly trapped in the airport by snowstorms or waiting for a delayed flight, you might get fed up with the journey. Steiger, who recently relocated from New York to Florida, spent an entire winter flying to Florida every weekend to make sure the trip went smoothly.

2. Carefully consider the property you plan to purchase.

Once you’ve settled on a particular state, you might steer toward locations and properties that are desirable and marketable, should you decide to sell. “If you change your mind and decide that it’s not for you, you’ll want to be able to easily sell the property,” Steiger says.

Fall 2013

Check the home’s price history to see how long it’s been sitting on the market and to ensure you’re paying a reasonable amount. Buying the smallest house on the best street in a neighborhood can be a good bet, as these homes often are quickest to sell, Steiger adds.

Should You Set up a Second Bank Account?

3. Make plans for maintenance.

Since you’ll be away from either home for an extended period of time, address the maintenance needs of your permanent and vacation properties. Steiger suggests hiring a property manager who can visit weekly to make sure there are no emergencies and to do basic yard maintenance. “The home doesn’t have to look like it’s going to be in a magazine,” she says, “but you don’t want grass that looks like nobody cut it for four weeks.”

4. Protect yourself.

It’s important to get to know your neighbors, so they can keep an eye on your home while you’re away. If you opt for a condo or townhouse, you might choose a building with a doorman or main

office for extra security. You also might consider equipping your property with video cameras that can be monitored online.

5. Document your trips for tax purposes.

For many snowbirds, a part-time vacation home is a first step toward legal residency in a new state — a move that may lower taxes. To prove you’re changing your residence, keep a calendar of how many days you spend in each state. Also, hang onto receipts and plane tickets that show where you spent money and when you traveled between homes. Watch out for little mistakes that can have major tax consequences. For example, someone might legally transfer his permanent residence from Pennsylvania to Florida. But when he’s back in Pennsylvania, he buys a resident fishing license rather than a non-resident license to save money.

Establishing Residency in Separate States

A Little Planning Goes a Long Way

It’s become easier than ever for snowbirds to set up a second home. “More people are doing this — it’s really amazing to see,” Steiger says. With a little planning, you may be able to create a winter getaway that’s stress-free for both your family and your finances.

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Financial Planning for Snowbirds