Home Is . . . Where the Domicile Is? – Part II of a two-part series

January 31, 2013 | Trusts & Estates

In our fall newsletter, we advised you of the intense review given a residency audit.  In the second part of this article, we have outlined the following steps that should be taken to successfully transition into a new domicile:

  • Declare your new state to be your place of domicile and residence in all forms or documents that require a recital of residence, such as Social Security Administration papers, passports, contracts, deeds, leases, credit cards, etc. Register to vote and have your name stricken from the voter rolls of your former state and to the extent that you engage in political activities, make an effort to see that these are centralized in your new state.
  • Purchase or rent a residence in the new state and move in. 
  • If possible, dispose of your former principal residence in your former state (by sale, gift to children, Qualified Personal Residence Trust, etc.) unless you can clearly show that it is used only as a vacation home for less time than the residence in your new state is used. New York courts have in some cases held that if an individual has more than one home and other evidence of domicile is not conclusive, the home first acquired will be considered the domicile. Thus, disposition of your former residence may become important, particularly if it was purchased first, and/or if it is significantly larger in size or more valuable than your new residence. After the change in domicile, it is especially important that you avoid spending significant amounts of time in your former domicile, particularly without interruption by returns to your new domicile. Time spent in a permanent place of abode in your former domicile may subject you to taxation as a resident.
  • Execute a new Will or Codicil in which you state that you are a resident of your new domicile.
  • Notify all New York social and religious organizations of which you are a member of your change of domicile and, if possible, assume nonresident membership status or resign. If possible, the address to be published in any directories for New York organizations should be changed to show your new address. In addition, also join an organization, temple or church in your domicile and, if so inclined, become active in community affairs. 
  • File Federal Income Tax Returns using your new address. Stop filing income tax and gift tax returns in your former domicile, except when required on particular income originating in such state, and then file as a nonresident using your new address.
  • Set up new banking and investment arrangements.

Finally, keep an annual calendar so you can show when you were in your new domicile each year and can prove your time outside your former domicile. Remember that phone bills, utility bills and credit card bills can be indicative of where you were living, so make sure your calendar is accurate. We hope this article is a helpful guide in making sure you will be treated as residents for income and estate tax purposes in your new domicile.

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