How Changing Your Domicile Impacts an Estate Plan
Where a person lives is not as fixed today as it was in times past, and in many cases, individuals move to gain a better lifestyle and/or take advantage of less burdensome tax systems. From the outside, it may seem unimportant when or where a person moves once an estate plan is in place, but a person’s legal domicile (the place in which a person is physically located and intends to make his/her permanent home) is critically important to the validity and enforcement of estate documents and the amount of tax liability a person’s estate may be obligated to pay. Updating estate planning documents upon moving a new state, particularly Florida, as the homestead and estate planning laws often differ from other jurisdictions, is key to seeing one’s wishes and intentions after death honored. A discussion of how domicile is legally established, and examples of how Florida estate law can undo plans if documents are not updated, will follow below.
What Is Domicile?
As mentioned above, at its most basic, domicile is the place a person is physically located and intends to permanently remain. Essentially, domicile is the place where a person has his/her permanent home and substantial connections. For legal purposes, establishing this status in a new location is not necessarily straightforward, as establishing what constitutes a permanent home and how to demonstrate substantial connection is subjective. One wants to do everything possible to ensure that only one state could assign that place as his/her domicile, as this determines which state tax laws apply, including gift and estate tax rules (notably, Florida has no estate tax). States generally look at five factors to determine if a person made a permanent and fixed change in location, and they are:
- The location, value, and amount of use of a home;
- Business ties to the state;
- The location of personal effects;
- The amount of time spent in the state; and
- Whether family is located within the state.
A person does not need to fully satisfy each factor to legally change domicile, but he/she can do a few things to make it easier to convince the government a legitimate change took place, including:
- If property is owned in multiple states, ensuring the home in Florida is the most valuable;
- Transferring one’s most important personal belongings to this state;
- Making all large purchases in Florida;
- Changing voter registration;
- Registering vehicles and obtaining a Florida driver’s license; and
- Transferring financial accounts to this state.
In addition, Florida does offer a Declaration of Domicile form new residents may file at the local courthouse, but other states may not accept it as conclusive.
Possible Effects on Estate Plan
Trusts are a popular method of preserving financial security for the creator and his/her family, but the laws on how long trusts are valid, and how to properly structure them can vary by state. One common example is that Florida allows trusts to remain in effect for 360 years after the death of the grantor, but other states have much smaller windows. In addition, Florida does not recognize springing powers of attorney, which are fairly common in other parts of the country. These documents would need to be updated and changed to durable powers of attorney to comply with Florida law. Finally, the administration of an estate can also vary widely from place to place, and Florida can offer advantages in that regard as well. While its estate administration is more involved than some places, it does offer summary administration at a higher threshold ($75,000), and does not have as much involvement in the management of irrevocable trusts as other jurisdictions require. Consulting with a Florida estate planning attorney is the best way to address any potential problems previous estate documents may present.
Get Legal Advice
You put a lot of time and thought into your estate plan, and do not want to see it abandoned simply by moving to a new place. William Rambaum has more than three decades of experience helping clients draft, execute, and administer Florida estate plans, and will put this knowledge to use to maximize your estate planning opportunities. Contact the Oldsmar office to schedule an appointment.