Where Do You Live? (It’s Not a Trick Question)

Have you moved without knowing it? People with more than one home may discover that they have inadvertently changed their state of domicile. While it’s possible to have more than one residence, you can have only one domicile for tax purposes. What difference does it make?

A state may have different income tax rates for full-time and part-time residents. A few states don’t have income taxes; some levy an intangibles tax on the value of investment assets; some states exempt retirement benefits from income tax.

Your estate will be probated in your state of domicile. Your will must meet the requirements of the state in which it will be subject to probate. Real estate located in another state may be subject to ancillary probate.
Different states have different death tax rules. In some areas, people may be exempt from federal estate tax but still owe state death taxes.

A number of factors will determine your state of domicile: where you’re registered to vote, the state in which you’re licensed to drive, where you pay federal income taxes. If you’re not sure of your domicile or the consequences of living in one state versus another, ask your tax adviser to help you. Then make sure your estate plan complies with the laws of your state of domicile.

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