Wealth Planning

Changing Your Domicile

Jody_King

By Jody R. King, JD, CPA

Vice President & Director of Wealth Planning

Choosing where to live should be more about lifestyle than taxes, but taxes can be a factor for some. Retirees may choose to relocate to a warmer climate that may be more tax friendly, and remote workers may decide to live farther from the traditional office. The choice of location can have a significant impact on both income and estate taxes. The important differences between domicile and residency in taxation are discussed below and a checklist is presented to help you understand the steps necessary to establish a new domicile.

Domicile and residency are often confused. For most, domicile and residency will be the same. Domicile is an enduring concept that reflects the location of your permanent home, the place you intend to return to when you are away. Domicile impacts where a person is subject to estate tax. This can be contrasted with residency which can be more transient, with mere presence triggering an individual to be considered a resident and subject to income taxes.

Changing domicile requires both capacity and intent, with various steps being available to make your intent to adopt a new domicile clear. When challenged, the authorities look at the facts and circumstances of your particular situation as a way of determining your intent to sever ties with the old domicile and establish the new domicile. Although not all of the following may apply to you, each of these steps you take demonstrates your intent and strengthens your position that you have established a new domicile:

Property

  • Purchase or sign a lease for a residential property in the new domicile
  • Consider selling your residence in the old domicile
  • Claim a homestead exemption for your new home if you own it and if available; cancel the homestead exemption in the old domicile, if applicable
  • Register cars, boats, and other vehicles in the new domicile; if you maintain a vehicle in the old domicile, make sure it indicates that you are a non-resident
  • Move items that are important to you to the new domicile, including family heirlooms and records

Identification

  • Change your driver’s license or state identification card to the new domicile
  • Execute and file a Declaration of Domicile for your new domicile, if available
  • Register to vote (and actually vote) in the new domicile; request to be removed from the voter roll in the old domicile
  • Change your address with the government for items such as Social Security, Medicare, or TSA pre-check

Medical

  • Establish primary care physician and dentist relationships in the new domicile
  • Update your medical insurance coverage (particularly Medicare-related coverage), if appropriate

Documents and Banking

  • Update estate planning documents to reflect the new domicile; execute these documents in the new domicile
  • File tax returns with the new domicile address
  • File a part-year or non-resident income tax return for the old domicile; file a final return with the old domicile, if appropriate
  • Open checking accounts in the new domicile
  • Move safe deposit boxes to the new domicile

Organizations and Memberships

  • Change your address for professional affiliations, organizations, and licenses to the new domicile
  • Join country clubs or other organizations in the new domicile
  • Get involved with charitable organizations in the new domicile
  • Move any religious affiliations to the new domicile
  • Change your gym membership to the new domicile

Other

  • Change your mailing address to the new domicile, and make sure to notify friends and family, credit card companies, utility companies, phone companies, insurance companies, trust officers, investment managers, and subscriptions
  • Hold holiday and family gatherings in the new domicile
  • Maintain a calendar to document days spent in various locations, particularly days spent in the new domicile versus the old domicile; make sure to be present in the new domicile for at least 183 days per year; note that your old domicile may consider any part of a day spent in that state as a day present there
  • When you travel, try to leave from and return to the new domicile
  • Consider making burial arrangements in the new domicile
  • Enroll any school-age children in schools in the new domicile
  • Relocate your pets to the new domicile and establish veterinary care

In short, in order to change your domicile your intent needs to be clear. The change must be real in order for it to be respected by state tax authorities.

NOTE: This is a facts and circumstances analysis and there is no set number of these that guarantee success.

Click here to view the pdf version of this article.

The opinions expressed in this article are as of the date issued and subject to change at any time. Nothing contained herein is intended to constitute investment, legal, tax or accounting advice, and clients should discuss any proposed arrangement or transaction with their investment, legal or tax advisers.

Learn more about how we can help you

Contact