Domicile and Residence

November 1, 2000 Advisory

Domicile and residence are two distinct legal concepts. Your domicile is
the place you intend to make your home. You can be a resident of more
than one state, but you are domiciled in only one state. Domicile is
indicated by a number of factors, which can include the location of your
principal residence, bank accounts and motor vehicles, your driver's
license and voter registration, and membership in local organizations.
Residence is usually determined primarily by the amount of time you
spend at a given place. In most cases, you are a resident of the state
in which you are domiciled. But you may also be a resident of another
state or of more than one state if you spend enough time there during
the year. For example, California and Arizona presume that you are a
resident if you are there for more than nine months during a one-year
Why Do Domicile and Residence Matter?
Where you are domiciled has important estate planning consequences.
The states have different gift, estate and succession taxes, so your
choice of domicile may affect the amount ultimately reaching your heirs.
Also, the states have different laws regulating other issues that may be
important to you, such as who is eligible to be appointed as an executor.
For example, Florida limits appointment as an executor to Florida residents,
nonresident relatives, and resident banks.
For many people, residence is most important for income tax purposes,
although residence may also affect other rights and privileges, such as
professional or recreational licenses and access to state land. The
states have different income tax rates, and certain states (e.g.,
Florida, Texas, and Virginia) have no state income tax.
Changing Domicile Or Residence
If you will be living in more than one state for any period of time during
the year, you should consider whether this will affect your residence
or domicile. If the move is temporary, or if property is maintained in
your original home state, it may not be necessary or advisable to change
your domicile or to establish resident status in the new state. However, if a change in
domicile or resident status may be advantageous, you might want to take
steps to establish domicile or residence in the new state.
It is important that your domicile and resident status is clear. If a
decedent's domicile is not clear, more than one state may try to claim
the decedent as a domiciliary and assess death taxes. Confusion about
resident status can result in complicated income tax problems,
particularly if care is not taken to preserve the right to claim the
deduction for income taxes paid to another state. In either case, clear
and consistent action now can avoid expensive difficulties later.