Domicile and Residence

Navigating the complexities of domicile and residence is crucial for ensuring your legal and tax status aligns with your intentions. Our Private Client Services team provides adept guidance to help you understand and establish your domicile while also managing your residence status. Whether you’re determining your principal residence, managing multiple state residencies, or addressing tax implications, our experienced team is here to offer personalized and comprehensive support. We take the time to understand your unique situation, providing tailored advice to help you achieve your goals and ensure compliance with all relevant laws and regulations.

Why do domicile and residence matter?

Where you are domiciled has important estate planning consequences because your state of domicile will assert primary authority to tax your estate. As a result, because the states have different gift, estate and succession taxes, your choice of domicile may affect the amount the beneficiaries of your estate ultimately receive. The states also have different laws regulating other estate issues that may be important to you, such as who is eligible to be appointed as your executor. For example, Florida limits executor appointments 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. States have different income tax rates, and certain states (e.g., Florida and Texas) have no state income tax.

Changing domicile or residence

If you are living in more than one state for any length of time during the year, you should consider whether this will affect the determination of your residence or domicile. If the move is temporary, or if the property is maintained in your original home state, it may not be appropriate 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.
With no income tax, no estate tax, and the abolishment of the tax on intangibles, Florida has become an especially appealing state in which to be domiciled. As a resident of Florida, you may also be able to obtain some relief from the state’s increasing property taxes (which have increased, in part, because of the lack of income and estate tax revenue).

Changing your domicile involves several steps to ensure your intent is clear and legally recognized. Here are key factors that courts and taxing authorities consider as evidence of domicile:

• Driver’s License and Vehicle Registration: Obtain a driver’s license and register your cars and boats in the new state. Ensure any licenses from your previous state reflect nonresident status.
• Property Purchase or Lease: Buy or lease a home in the new state. Your new residence should be furnished as a permanent home, not a vacation spot. If renting, opt for a lease term of at least one year.
• Time Spent: Spend more than 183 days per year in the new state. Limit trips back to your previous home and keep records of your time spent outside the new state.
• Voter Registration: Register to vote in the new state and notify your previous state to remove you from their voting lists.
• Declaration of Domicile: File a declaration of domicile with the county clerk if available in your new state.
• Bank Accounts and Safe Deposit Boxes: Move your bank accounts and safe deposit boxes to the new state.
• Change of Address: Notify family, friends, business associates, and relevant organizations of your new address.
• Home Base: Use the new state as your home base for travel and major purchases. Keep personal belongings like heirlooms and furniture there.
• Legal Documents: Update your will and trusts to reflect your new residency.
• Tax Returns: File tax returns in the new state and update your address on federal returns. Comply with any state or local filing requirements.
• Local Affiliations: Join local clubs, religious groups, and participate in charitable activities in the new state.
• Homestead Exemption: Apply for the homestead exemption if available in your new state to reduce real estate taxes.

It is important that your domicile and resident status are 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 also result in complicated income tax problems, particularly if care is not taken to preserve the right to claim a deduction for income taxes paid to another state. In either case, clear and consistent.

An individual’s domicile and residence status can have a substantial impact on your estate planning. Because these are complex, case-by-case analyses, consider consulting with your Wiggin and Dana attorney if you spend significant time in another state or if you are contemplating a move.

Resources

• Domicile and Residence: Key Factors to Consider for Estate Planning
• Checklist for Changing Domicile
• Sun, Sand, and State Residency: Navigating Florida’s Domicile Rules