Your domicile — your home or permanent residence state — will control where your estate is probated and which state’s rules apply at your death. State estate tax rates can vary significantly. So your domicile can dramatically affect how much of your estate goes to taxes vs. your heirs. Your domicile also may have other important ramifications during your life, such as determining how (and if) your income will be taxed. State income tax rates vary widely.
As a result, it’s important that it’s as obvious as possible and not overly subject to interpretation. If you have homes in multiple states, you may be inadvertently adding confusion to your eventual estate administration. Why? Because more than one state may lay claim to your estate and the accompanying tax.
Even though your intent with respect to domicile is important, your actions are more important. To demonstrate that you consider a particular place to be your domicile:
- Use the address for correspondence, particularly with respect to the IRS or state tax authorities with whom you may have to argue your position,
- Register to vote there,
- Register and insure your vehicles there,
- Have your driver’s license and, if relevant, other licenses issued there, and
- License or register your pets there.
If you change your domicile, be sure to update your estate plan to reflect your new state as your state of domicile and, as appropriate, as the controlling law.
Regardless of the steps you take, more than the intended state may try to claim that you are domiciled there. Determine where you want your domicile to be and take as many steps as necessary to strengthen your argument. After all, just because you have a home in a state, it doesn’t necessarily mean that the state is your home state.