Question: Can two states claim me as a resident for tax purposes if I live in one state part of the year and another state the rest of the year?
Answer: You should take all steps possible to avoid a claim of dual domicile upon death. You should analyze the tax structure of both states and decide where you want to live. You may wish to consider changing the situs of assets by changing their character.
Real estate, tangible personal property, and mineral interests are generally governed and taxed upon death only in the state where the property is located. Intangible property, e.g. securities and partnership interest, are usually subject to taxation, if any, in the state of the owner’s domicile. Transferring real estate into a corporation, partnership, or certain types of trusts may change the nature of the property from real property to tangible property.
Usually real property can only be taxed at its situs, whereas cash, bank accounts and securities (intangible property) are taxed where the decedent was domiciled at the time of death.
The United States Supreme Court has ruled that the question of domicile is for the states to decide, and it is not unconstitutional for more than one state to claim a decedent of that state for the purpose of imposing an inheritance tax. Because domicile is determined under each state’s law, two or more states can constitutionally tax a person’s intangible property.
To constitute a domicile, or to effect a change of domicile, there must appear both an actual residence and an intention to remain there or make it one’s home. The intention to establish a residence must be bona fide and unequivocal. If one were to live in Florida for five to seven months and live in another state for the remainder of the year, the determination of where he or she was domiciled would depend on some or all of the following factors:
- Whether residence was declared homestead;
- Location of personal property;
- Location of voter registration;
- Location of banking accounts;
- Membership in clubs, churches, etc.;
- Location of charge accounts;
- Location of securities;
- Place where will or trust was signed;
- Address on tax returns;
- Address of automobile license;
- Telephone listings;
- Location of contributions.
Assets in multiple states may also have to go through multiple probate proceedings. Your attorney may advise you how these assets can avoid probate.
For additional information about a wide range of elder care matters, visit ElderCareMatters.com – America’s #1 source to find Elder Care Experts, Information and Answers about elder care matters.
Joseph F. Pippen, Jr., Esq.
Law Office of Joseph F. Pippen, Jr. & Associates
Largo, Florida 33771