For many people, the idea of changing their domicile can be an important facet of their overall estate plan. This is particularly so for people who have homes in more than one state. In those situations, determining which state should be considered the domicile can have a number of important implications. A person can have only one domicile, or principal residence. Selecting the most appropriate site is very important and so are the steps needed to ensure that the selection made will be recognized by taxing authorities and others.
A popular state for many people is Florida. For those wishing to escape long, cold northern winters, spending more time in Florida is often a perfect choice. Add to that the potential tax savings, in that Florida has no income tax and no estate tax, the idea of changing one’s domicile to a state such as Florida can be very attractive.
Generally, determining one’s domicile is matter of one’s subjective intent, i.e., where do you intend to reside permanently. Proving that intent, however, is often a matter of various objective indicia. Certainly, the testimony of the person as to where he or she intends to reside permanently is a critical piece of information. Such testimony, however, is not always persuasive to the various states’ taxing authorities. Further, in the case of a decedent’s estate, the only person who can testify to that subjective intent is deceased. In those cases, the only evidence remaining is the objective indications of where the person intended to reside.
There are a number of steps that a person can take to evidence their intent to change their domicile. While not meant to be exhaustive, the following list are some of the steps that one should consider taking. The more of them that you do, the better. Failing to do one or more of these is not necessarily fatal, however.
- Sign a declaration of domicile in the new state if the state has such a procedure. Florida does.
- Obtain a drivers license in the new state. Allow your old license to expire. Better yet–turn in your old license.
- Any motor vehicle that you may own should be registered and insured in the new state.
- Register to vote in the new state. Notify the town or city in Massachusetts to remove your name from their voting list.
- Use your new address for everything, especially for your federal income tax return. Change your address to the new state for your bank and brokerage accounts as well as for all of your charge accounts, etc. In other words, do a formal and complete change of address with all parties who regularly send mail to you. Do not simply prepare a forwarding order to have mail sent to the other state when you are there. Have a forwarding order to Massachusetts when you are here.
- Prepare and file a Massachusetts income tax return and mark it as “FINAL RETURN.” Use only a non-resident form if you must continue to file in Massachusetts because you continue to receive “Massachusetts-source income” (e.g. pension from employer, rental income from real estate in Massachusetts, etc.).
- Cancel any memberships at your golf club, house of worship, etc. and establish memberships in the new state.
- Apply for a “homestead exemption” on your home in the new state if such procedure exists. It does in Florida.
- Establish bank accounts, brokerage accounts, etc. in the local office of the new state.
- Arrange medical insurance through the new state’s system and use physicians in the new state.
- Spend real time in the new domicile. Remember the issue of domicile is a question of fact, so that if you call yourself a Florida resident but act like a Massachusetts resident, the Massachusetts Department of Revenue will call you a Massachusetts resident!
In all matters, try to look and act like an out-of-state resident who visits Massachusetts to see his family. Do not look like a local resident who leaves for extended vacations. Residency (domicile) is a question of fact and the more you look like a non-Massachusetts resident, the better will be the likelihood that the taxing authorities will not disagree with you and your estate.