Do
You Have
Residences in More Than One State?
If you spend time in
any given year in residences in different states, somewhere in
your travels
you also may want to schedule an appointment with your professional tax
advisor. One topic for discussion would be the legal concept of
domicile.
In simplest
terms, a
person’s domicile is the place where he or she intends to return after
leaving
for another location. The special significance of where a domicile is
established is in tax planning. An individual’s domicile
determines which
state’s income, gift, and estate tax laws apply, and in which state or
states a
person, trust, or estate is taxable. The rules that will govern the
administration of an estate also depend on the state of domicile.
Inadequate
attention to establishing and documenting an intended state of domicile
could
mean that even the best-laid estate plan might go awry because the laws
of a
different state could apply. The end result could be an unexpected tax
burden
that otherwise could have been avoided.
Although the
basic
definition of “domicile” is simple enough, many different criteria may
be taken
into account in pinpointing a state of domicile. No one
factor is controlling
and the states differ in the criteria that they use. The address
included in a
person’s will may be a good indicator of the person’s domicile. A
nonexhaustive
list of other factors would take into account in what state a person
votes,
registers an automobile, has a driver’s license, keeps important
personal
property, pays state and local income and personal property taxes, last
applied
for a passport, and keeps the bulk of his or her money. Contrary to the
old
saying, you can go home again, and it is a good idea to make sure that
you and
the government agree on where that home is.
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