• Estate PlanningFlorida Domicile Planning

    Today’s mobile lifestyle and multiple home ownership have caused the question of domicile to become more difficult to determine. For example, if a person winters in Florida, spends the spring in Arizona, then moves on to his or her summer home in Cape Cod and, lastly, spends the fall in New York City attending to business affairs, where is his or her state of domicile?

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    This question becomes even more important when the time comes to levy death taxes.  Each state will make its own separate determination regarding the decedent’s domicile.  If the evidence is ambiguous, this could result in more than one state claiming the decedent as it’s domiciliary, with each seeking to impose its own Inheritance Tax on the decedent’s entire Estate.

    Under Florida Law, for purposes of Estate Taxes, an individual is presumed to have died domiciled in Florida if he or she dwelt in the state for any period of twelve (12) consecutive months in the twenty-four (24) months preceding death, notwithstanding whether such person may have traveled outside the state, voted in Florida or was assessed taxes in the State of Florida.

    Generally, there are two (2) occasions which prompt an inquiry or investigation by a foreign jurisdiction when a person changes his or her domicile to Florida.

    First, a new resident can expect follow-up questions from a former state of domicile when he or she stops filing State Income Tax returns there. The fact that such a last filing is a “final return” should be denoted on the return itself, if such is true.

    Accompanying the return should be a copy of the person’s Declaration of Non-Domicile filed with his/or her former state of residency and/or a copy of his or her Declaration of Domicile filed in Florida. See Exhibits I, II and III in our Firm’s book for examples.

    Second, if a new resident continues to retain significant contacts with his or her former state, which are of a type that could create doubts as to his or her legal domicile, then it is wise to avoid matters which are likely to come to the attention of the taxing authorities of the former state.

    Ownership of real estate in the state of former domicile creates the greatest danger.  Real estate is a form of property which attracts special attention in various ways including the County Court Clerk who records transfers and potential purchasers, title insurance companies, banks and mortgage companies in the process of checking titles, liens, real property records, taxes, etc.

    Furthermore, an Estate Tax is often payable to the former state on the value of real property owned by the decedent and located within that jurisdiction.

    This is true regardless of whether a Florida domicile has been validly established.  And, during the review period following the decedent’s death, the tax department of the former state may decide to claim that the decedent’s entire Estate is taxable there.

    Consider, for example, a person who owns a home in his/or her former state of domicile, where he or she continues to stay for five (5) months of the year, and where he or she retains affiliations with his or her old church or synagogue, country club, bank and other contacts. These circumstances could cause a serious Estate Tax problem.

    This client would be well advised to consider transferring ownership of the real estate to another family member or perhaps to a family Trust, partnership, corporation or limited liability company, or to make another similar satisfactory disposition of the property.

    Then, upon death, there is no transfer of title to such real estate which would prompt an inquiry into the real estate ownership, and the former state’s tax department is less likely to become involved.

    There are several Estate Planning steps that can be taken to clarify the domicile question and which are recommended for persons changing their domicile to Florida.  Some of these factors are set forth as follows:

    1. File a Declaration of Non-Domicile with the state and county of former residence.  Established procedures may be absent and improvisation required.  (See Exhibit I of our Firm’s book)
    2. File a Florida Declaration of Domicile in the Office of the Clerk of the Circuit Court in the Florida county in which you reside. If a residence is also maintained in another state, a Special Declaration of Domicile should be filed.  (See Exhibit II and III of our Firm’s book)
    3. Declare in your Will that you are a legal resident of the State of Florida, and execute all Estate Planning documents in Florida.
    4. Transfer bank accounts, safe deposit boxes and securities to Florida institutions (safe deposit boxes in Florida are not sealed upon death of a lessee or a co-lessee).
    5. Register to vote in Florida and actually vote in all elections.
    6. Register your boat and/or automobile in Florida, and obtain a Florida Driver License.  If a non-driver, obtain a Florida Identification Card.
    7. Discard your out-of-state driver’s license.
    8. File your Federal Income Tax return with the District Director of Internal Revenue Service where prescribed for filing by Florida residents.
    9. State that you are a resident of Florida, and use your Florida address in all business transactions.
    10. Change social, religious and other national organization memberships to Florida affiliations or branches, and use your Florida address in all correspondence and/or membership data.
    11. Own a home or lease an apartment in Florida, move in, and furnish this home or apartment more extensively than any other residence.
    12. When traveling out of Florida, register as being from Florida, and give a Florida address or post office box.
    13. Obtain a Library Card from the local (Florida) City, or County Public Library.
    14. File non-resident State Income Tax returns in the state of former residence if you continue to have local income from sources within that state.
    15. Change advisors, such as banker, accountant, lawyer, account executive, financial planner and/or life insurance professional, to those located in Florida rather than in the northern state.
    16. Relinquish the return trip portion of any round-trip airline tickets to destinations in your former state of residence.
    17. Refrain from referring to any northern residence as your “home” in Estate Planning documents.
    18. Reduce charitable contributions to northern organizations in favor of increased donations to Florida charitable entities.
    19. Relinquish telephone number listings and all other utility billings in your name in your former state of residence.
    20. Apply for Florida Homestead Exemption, if qualified.
    21. Keep stays in nursing/retirement homes in other states to a minimum and only if authorized or required by a Florida physician.
    22. Move art objects, jewelry, antiques and all other substantial items of personal property to your Florida residence.
    23. Consider maintaining a personal log or journal evidencing days spent in Florida, and elsewhere, to validate claims of Florida domicile.
    24. Transact business in Florida and render services, where possible, in Florida under written documents requiring same.
    25. Do not claim residency in a state other than Florida to receive discounts for goods and/or services.

    The timing of any change of domicile to Florida is important, especially for Income Tax purposes in the state of former residence. For example, by establishing Florida domicile prior to January 1st, you will avoid the requirement of filing a resident State Income Tax return in your former state for the upcoming year.  And, in some instances, you may be able to avoid State Income Tax on sales of homes and/or businesses by precise timing of your change in domicile to Florida from your former state of residence.

    In instances of disputed domicile at death, the State of Florida has enacted a Statute which authorizes the Florida Department of Revenue to litigate, on behalf of the Florida Estate of a deceased person, the question of determination of domicile for Inheritance Tax purposes.

    As favorable taxes are often mentioned by persons considering a change of their domicile to Florida, it may be helpful to consider all of the Tax Advantages to Florida Domicile.

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    If you or a loved one needs help with a situation involving one of these areas, please contact Thomas N. Silverman, P.A. at 561.775.7500 (24 hours) or info@FloridaProbateCounsel.com.

    Thank you for contacting our firm. One of our associates will be in contact with you shortly. If the matter is urgent, please call our office directly at 561.775.7500 to speak with an attorney.