Choosing Your Domicile: South Dakota Advantage
Many RVers spend countless hours trying to find the “best” state and county in which to domicile.
In the quest to find the ideal state and county of domicile, RVers ponder a seemingly endless list of determinants: tax considerations, ease of managing contact with a state while living on the road; retaining access to doctors, lawyers, accountants and other professionals, remaining close to friends and family and South Dakota’s even determining the ideal climate. Many blogs, forum posts and articles attempt to aid RVers in their determination of their perfect place to domicile. Ultimately, there is no perfect state of domicile, but it is vital to take the time to research and analyze where to domicile in light of the factors highlighted above.
Historically, RVers, after their research and analysis of where to domicile, conclude with overwhelming frequency that three states meet their criteria: Texas, Florida and South Dakota. These states have no income tax, low sales and use tax and they have processes that enable RVers to interact with the state while living and traveling away from it.
Estate Planning for South Dakotans: South Dakota Domicile
South Dakota, interestingly, offers a benefit that Texas and Florida do not—the ability to create a dynasty trust. A dynasty trust enables a family to pass assets through many generations, while attempting to minimize the tax consequences of each generational transfer.
A discussion of dynasty trusts requires a brief history of estate law. One of the fundamental principles our founding fathers held is that the law should prevent families from passing assets, specifically land, through their generations, indefinitely. Our founding fathers did not want to replicate the European feudal land system where common citizens could never ascend into the ranks of nobility because all of the land would forever be owned by “noble” families.
In the United States, the Rule Against Perpetuities prevents the creation of a feudal land system by truncating the transfer of wealth. States vary in their construction of this rule. Some states will allow families to pass assets for hundreds or even a thousand years.
South Dakota, however, does not have a Rule Against Perpetuities. In theory, families could establish a dynasty trust in South Dakota and pass assets through the generations forever. In addition, those families could condition the use of those assets in various and specific ways.
Therefore, estate planning becomes another factor for RVers to consider when choosing a domicile. South Dakota’s dynasty trusts may be a compelling reason to choose a South Dakota county.
(If this resonates with you, you are strongly encouraged to consult with a South Dakota estate planning attorney. The nuances of the Rule Against Perpetuities are complex. You should not attempt to create a dynasty trust without the advice of an attorney tailored to your specific circumstance.)
Health Insurance in South Dakota
One of the many challenges facing nomadic families is health insurance. Many RVers are over 65 and qualify for Medicare. Medicare suits RVers well because it is nationally recognized.
In the recent past, insurance companies began offering private alternatives to Medicare, called Medicare Advantage plans. Medicare Advantage plans must adhere to the strict guidelines set by the federal government as Medicare Advantage plans typically supersede Medicare Part A and B and offer many of the benefits of Medicare supplements, like prescriptions and coverage-gap fillers. Open enrollment for Medicare and Medicare Advantage plans is from January 1 to March 31. Consult your insurance professionals for guidance in choosing the right plan for you.
For those families that do not qualify for government-facilitated programs like Medicare or Tricare, or do not receive adequate health insurance from their employer, obtaining health insurance that will travel across state lines is a challenge.
In recent years, most health insurance companies discontinued offering PPO plans for those not covered by employer plans. PPO plans are convenient for RVers because they enable traveling families to visit any health-care provider regardless of whether that provider was in or out of the insurance companies’ “network.”
With PPO options shrinking or nonexistent, a popular solution are indemnity plans and health share plans. However, these insurance alternatives are complex. We strongly encourage you review these alternatives with an insurance professional to determine if they are appropriate for you.
Pros and Cons of South Dakota Domicile
These are merely a few of the many factors to consider when determining where to domicile. And, selecting a state (and county) of domicile is very personal.
The factors that are most important to you may not be a concern for someone else. As such, we strongly recommend you conduct independent research to determine which option is best for you, and whether South Dakota residency can fulfill that need.
To learn more about domicile in South Dakota, visit this page.
Want to learn more about domicile in Texas or Florida? Check out the domicile guides here.
Author
Shawn Loring | SKP #76442
Shawn received his law degree from Southwestern Law School, where he was on the Dean’s List. Shawn is currently licensed to practice law in California and in Texas. And, he remains a partner at Loring & Associates, PLLC.
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One strange thing about South Dakota that’s a disadvantage is that memberships are taxed in SD. For example, I have a Thousand Trails, Hulu, Costco, etc. members and every one of these are taxed! If you have a credit card where the zip code is SD you’ll be taxed on these memberships. It adds up.
One other (and big) consideration for full time RVers (and maybe others) is the cost of vehicle insurance. We found that insuring our toad and Class A for fulltime coverage is 3 times as expensive in Texas as in our “home” state, many thousands of dollars more, nearly wiping out the advantage of no income tax…. Just one more consideration.
SD requires mailbox owners to put ‘PMB’ on their Drivers License address. PMB addresses are invalid for the purchase of a firearm from a dealer.
South Dakota taxes groceries, which is possibly the most regressive tax possible. Your overall tax burden may be low here but the social costs of their policies are high.
Having FL domicile for the last fifteen years, I can attest to low taxes, no tax on groceries, no property tax on vehicles (just yearly tag, which is super inexpensive), insurance seems to be average to below average in cost, they allow for CCW, and extensive medical services. Isn’t much to see here, once you’ve been to the beaches, but it’s an amazing place to call Home.
One big disadvantage to a Florida domicile, is if you plan on parking your vehicle for an extended period of time — for example, you’re going to be traveling overseas. Florida requires one to maintain auto liability insurance at all times. If the insurance is cancelled or lapses, Florida will suspend your driver’s license, with fees and fines to have it reinstated. You can surrender your plates (effectively unregistering the vehicle) before cancelling the insurance, but would then need to re-register upon returning.
If you’re doing this for a once-in-a-lifetime trip, it might be a minor inconvenience. If you’re planning on being away a few months each year, it becomes expensive, and hassle, or both.
I have had a SD resident status for 14 years & have had no problems. How many of you are going to buy a fire arm, so I don’t see that as a problem. How many of you are going to stay in SD & buy groceries there? I don’t see that as a problem. A lot of states tax groceries Missouri & kansas being 2 that do. I have my car insured in Kansas & full timers ins on MH. I saved over 3,0000 a year because SD does not have property tax on vehicles like Mo. does. All my bills go to my Daughters in Kansas so she can pay them for me. I think you just have to pick the state that best suites your needs & easy enough to get to for renewel of driver license. I am with Americas Way & they get my car & MH license tags for me each year, also if you buy another MH they will take care of the transfers on it.
I am struggling between SD and FL. We will not need health insurance so that levels the playing field more.
Still, SD has some major financial pluses. First, my research shows FL is 40% higher than National Average and SD is 40% below. FL has a big 1 time excise tax on all vehicals but registration is much less through the years. If you buy a new RV or truck SD 4.5% FL 7% sales tax.
So where’s my struggle-the odds are we’d be in FL almost every year even for just short periods, we’d rarely be inSD except to get Drives Licenses. There’s some advantages of being in your state of residence like a lot of State Dissbled Vet benefits, hunting, fishing license fees, free entry into state and local parks verses out of state resident fees.
Still SD is where I a l
eaning and no one is locked in anywhere we can all change again later.