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State of Residency vs. State of Domicile in Your Estate Plan

In the three months since Joan Rivers' untimely death, the comedienne's estate planning strategies have attracted much attention, most recently, her unorthodox decision to declare ties to two states.

According to Rivers' will she was a resident of New York; however, her domicile -- or the state in which she intended to reside indefinitely-- was California.

Entertainers, like other high net worth individuals, often have homes in multiple locations and may therefore legitimately choose one state as their residence and another as their domicile. Of course, this may have tax implications, and that is the case with Rivers' estate.

Both California and New York have relatively high state income taxes, but while California has had no estate tax since 2005, New York still maintains a 16% estate tax. New York's laws are further complicated by last April's increase in the estate tax exemption from $1 million to $2.062 million per person. The exemption will rise yearly until it is equivalent to the federal inflation-adjusted estate tax exemption, but the exemption is phased out once the New York taxable estate has a value that is 5% greater the state estate tax exemption.

It would have made sense for Rivers' to want California laws applied to the distribution of her estate; however, one cannot switch domiciles simply to take advantage of state tax benefits. State tax authorities will look at your driver's license, vehicle registration, voter registration, federal income tax return, passport, and other documents in order to determine if you are being honest about where you are based. They may also ask how much time you spend in each state in order to determine where your proper domicile should be.

How Can We Help?

If you are a professional with homes in two different states, a retired individual who spends part of the year in a different state, or a non-citizen with an ambiguous domicile, it's imperative that you speak to an estate planning attorney to make sure your interests are protected and that your assets will be distributed according to your wishes. If you are in need of legal representation relating to an estate planning issue, please call our office at (626) 683-8113 or email us at info@PasadenaLawOffice.com.

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