THE IMPORTANCE OF DOMICILE

A Private Clients Group White Paper

Our society has become increasingly mobile and people frequently relocate from state to state, own vacation
homes in a state different from that of their year-round residence or retire out of state. As a result, it is not
uncommon for an individual to have established legal domicile in more than one state during his or her lifetime.
If you own homes in more than one state, have recently relocated, or are contemplating relocating or purchasing a
new residence, you should carefully consider the tax and non-tax consequences of a change of domicile. Once
the decision to change domicile is made, you should consciously make every possible effort to arrange your
affairs to reinforce your choice of domicile.

Domicile Compared to Residence

The concept of “domicile” is similar to, and is easily confused with the concept of “residence.” While frequently the
state of one’s domicile is also the state of one’s residence, this does not hold true for everyone. While a person
may have a number of different residences or be a resident of a number of different states, he or she may only
have one domicile at any given time. The issue of one’s domicile is of particular importance for persons who own
a number of homes in different states or who are considering relocating to another state.
A person’s “domicile” is his or her permanent home, to which he or she always intends to return. “Domicile” is
often defined as (i) actual residence within a particular state, combined with (ii) the intention of making that state
one’s permanent home. Actual residence in a state without the intention to live in that state permanently does not
suffice. Since domicile is a question of intent, courts often look to a person’s overall manner of living to determine
whether there has been a change of domicile.
The concept of “residence,” on the other hand, is based upon objective factors. Like domicile, a person’s
residence is dependent upon a finding of physical presence within the particular state. Whether a person is a
resident of a state may be determined, for example, based on the number of days spent within the state or the
ownership of property within the state. Reference must be made to each state’s laws to determine the tax and
legal consequences of being a resident of that state. However, no finding of intent is required for a person to be
deemed a resident of a particular state. Thus, depending upon the laws of the particular jurisdiction, a person
may be deemed a resident of more than one state and a domiciliary of yet another.

Consequences of Domicile
The choice of domicile carries with it various legal consequences. It often determines (i) jurisdiction to assess
state income and death taxes; (ii) primary jurisdiction to probate wills and administer estates; and (iii) judicial
jurisdiction over an individual. Domicile also determines whether and where a person may exercise various legal
rights and privileges, such as voting.
Generally, you will be subject to death taxes only in your state of domicile. However, if you die owning real
property in another state, that state may impose its own death taxes on the value of the real property located in
that non-domiciliary state. Other state taxes, such as income, intangible property and real property taxes, are

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often imposed in various degrees on non-residents, residents, and domiciliaries. It is therefore possible for an
individual to be subject to a variety of taxes in more than one state. Consequently, when deciding whether to
change your domicile, the impact of taxes must be examined.

The Danger of Double Estate Taxation

Federal courts have allowed two or more states each to make an independent determination of domicile and each
to assess its own estate and inheritance taxes on that basis. The United States Supreme Court has held that
such double taxation is constitutional. In one infamous case, New Jersey and Pennsylvania both claimed an heir
to the Campbell Soup fortune as a domiciliary and each state collected $17 million in state inheritance taxes from
the estate. Since a determination that you are domiciled in more than one state could have extremely adverse
and costly consequences, it is imperative to take all the steps necessary not only to establish your new domicile,
but also to revoke your prior domicile.

Community Property Considerations

In addition to the possible tax implications outlined above, you should also be aware of other issues sometimes
associated with the ownership of multiple homes or a change of domicile. Notable among these is the possible
impact of community property laws. Many married couples own at least some, if not all, of their assets either as
tenants in common or as joint tenants with rights of survivorship. While these forms of ownership are recognized
in all fifty states, nine states (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and
Wisconsin) impose a separate community property system on property acquired by spouses. Community
property laws can have a significant impact upon a person’s right to dispose of marital property either during his or
her lifetime or upon his or her death. In addition, community property may be treated differently than separate
property in tax matters, as well as in the event of creditor problems or divorce.
Since property acquired in a community property state does not necessarily lose its character following the
property owner’s change of domicile, a person may own community property long after he or she leaves the
community property state. Accordingly, when considering a change of domicile or the purchase of a second
home, the possible impact of community property laws should not be ignored.

Choosing Your Domicile

If you maintain homes in two states and intend to remain domiciled in your original home state, you should take
every step possible to indicate that you continue to regard that state as your home state. On the other hand, if
you wish to change your domicile to another state but retain a home in your original state, you should take steps
consistent with this change of domicile that manifest your intention to abandon your original domicile.
Court cases deciding the issue of domicile indicate that no one factor conclusively establishes domicile. As
mentioned above, the determination of one’s domicile is a matter of one’s intent, therefore, courts often look to a
variety of factors in determining whether there has been a change of domicile. A person’s declarations as to what
he considers to be his home, residence or domicile may be used as evidence of intent. Such declarations often
are found in formal legal documents as well as in other written instruments, such as letters, hotel registrations and
the like. To make your choice of domicile clear, you should take as many of the following steps as are possible in
view of your particular circumstances:

In Your State of Desired Domicile

Execute a new Will or a Codicil which recites your new domicile and which complies with all the legal
requirements of your new state of domicile.
Execute new Durable Powers of Attorney, Living Wills and Health Care Proxies which recite your new
domicile and which comply with the legal requirements of your new state of domicile.

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 File a Declaration of Domicile, if available.
Purchase and furnish a home to be used as your primary residence.
Register as a voter and vote.
File your federal income tax return with the appropriate IRS regional service center and show your state of
desired domicile as your residence address.
Pay state and local taxes as a resident.
Obtain a driver’s license.
Register your automobile.
File for any applicable tax exemptions on residential property.
Be physically present within the state as large a part of each year as is practicable, especially during the initial
year. Some individuals may wish to keep a diary of trips out of state and of nights spent in and out of state.
Maintain a major portion of your bank accounts and brokerage accounts.
Open a safe deposit box for your jewelry and other valuable property.
Pay Blue Cross or other health insurance premiums.
Conduct your business or profession in state to the extent possible.
Join clubs, religious and social organizations.

In Your Former State of Domicile

If you have filed a Declaration of Domicile in another state, mail a copy to the tax authorities of the non-
domiciliary state.
Have your name removed from the voting rolls.
Surrender your driver’s license.
Pay any taxes due as a nonresident. Mark your last return as a resident “FINAL,” using your new address.
Spend as little time as practicable in the state.
Close brokerage and bank accounts in the state.
Change club, religious and social memberships to “nonresident” status.

In addition, you should

Describe yourself as a resident of your domiciliary state in all legal documents that require a recital of
residence, such as passports, real estate deeds, contracts, leases and credit applications.
When traveling, use your new address as your residence when registering at hotels, motels, etc.
Send a change of address to all business entities with which you deal, including those that presently owe you
money or that may owe you money in the future, e.g., credit card companies, insurance companies or former
employers that provide pension plans or death benefits.
Consider transferring title to any residential real estate situated in your state of former residence to other
family members, or to trusts for their benefit, but only after considering the estate planning consequences of
such a transfer.
Above all, pursue a consistent course of conduct indicating an intention to abandon your former domicile and
establish a home in the new state.

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It is advisable to take as many of these steps as practicable since most courts determine domicile by weighing all
factors. Taking most of these steps will establish a cumulative body of evidence substantiating your intent to
change domicile, thus minimizing the threat of double taxation.

Taxes are Not the Only Consideration

A change of domicile cannot be accomplished simply by signing an affidavit. Rather, one’s lifestyle must be
consistent with a permanent change of domicile. For many of our clients, the savings in lifetime and death taxes
which might be accomplished by a change of domicile are not sufficient to warrant the abandonment of an
accustomed way of life, particularly if establishment of a new domicile would require spending far more time in the
new location than otherwise would be desired.
If you are considering a move to a new state or foreign jurisdiction and would like more information concerning the
factors leading to a choice between domiciles, please do not hesitate to call your Cummings & Lockwood attorney.

Revised February 2006

Copyright 1998, Cummings & Lockwood LLC. All rights reserved.
This document is intended to convey to you the principal characteristics of the Importance of Domicile as they
apply to common situations. For this reason we have deliberately simplified technical aspects of the law in the
interest of clear communication. Under no circumstances should you or your other advisors rely solely on the
contents of this document for technical advice nor should you reach any decisions with respect to this topic
without further discussion and consultation with a Cummings & Lockwood attorney.
In accordance with IRS Circular 230, we are required to disclose that: (i) this memorandum was not intended or
written by us to be used, and it cannot be used by any taxpayer, for the purpose of avoiding penalties that may be
imposed on the taxpayer; (ii) this memorandum was written to support the promotion or marketing of the
transaction(s) or matter(s) addressed by the memorandum; and (iii) each taxpayer should seek advice on his or
her particular circumstances from an independent tax advisor.

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