Select Your Domicile Carefully
If you have residences in more than one state, it is important to determine in which state you wish to establish your legal domicile. Your choice of domicile carries with it various important consequences. For example, domicile often determines jurisdiction to (i) assess state income and death taxes, (ii) probate wills and administer estates, and (iii) enforcement of judicial orders.
It is important to carefully document your chosen state of domicile; otherwise, you may be deemed a domiciliary of more than one state. In a landmark case, the Unites States Supreme Court allowed New Jersey and Pennsylvania to each make an independent determination of domicile and allowed each state to assess its own tax on that basis. As a result, each state collected $17 million in state inheritance taxes.
Because a determination that you were domiciled in more than one state could have adverse and costly consequences, it is imperative to take all the steps necessary to both establish your domicile, and revoke a prior domicile.
Legally, domicile is defined as actual residence within a particular state combined with the intention of making that state your permanent home. In order to establish a new domicile, you must first abandon your old domicile. Since domicile is a question of intent, the courts often look to a person’s overall manner of living to determine whether there has been a change of domicile.
In order to make your choice of domicile clear, take as many of the following steps as possible in view of your particular circumstances:
In your state of desired domicile:
1. Execute a new Will which states your new domicile and which complies with all the legal requirements of your new state of domicile
2. Purchase a home, individually or in trust, to be used as your primary residence and file for any applicable tax exemptions on residential property.
3. Register as a voter, and vote.
4. File your federal income tax return with the appropriate IRS regional service center, and show your state of desired domicile as your residence address.
5. Pay state and local taxes as a resident.
6. Obtain a driver’s license.
7. Register your automobile.
8. Be physically present within the state as large a part of the year as is practicable, especially during the initial year.
9. Maintain a major portion of your bank accounts and brokerage accounts in the state.
10. Open a safe deposit box and transfer jewelry and other valuable property into it.
11. Pay health insurance premiums in the state.
12. Establish all credit cards in your desired state of domicile.
13. If engaged in a business or profession, carry it on, to the extent possible, in the new domicile.
In your former state of domicile:
1. Have your name removed from the voting rolls.
2. Surrender your driver’s license.
3. Pay any taxes due as a non-resident. Mark your last return as a resident “FINAL” using your new address.
4. Spend as little time as practicable in the non-domicile state.
5. Close brokerage and bank accounts in the non-domicile state.
6. Change club, church and social memberships to “non-resident” status.
7. Cancel credit cards in the non-domicile state.
You should consult with your attorney and other professional advisors and do everything possible to clearly delineate your choice of domicile.
Steven W. Tarta, Esq. brings more than 45 years of professional experience to his practice, with a sophisticated focus on Estate Tax Planning, Living Trusts and Elder Law.