Financial Insights

Residency vs Domicile: What You Don’t Know Could Cost You

Written by  Joseph M. Donohue, Trust & Estate Attorney at Donohue, O’Connell & Riley PLLC: For more information about his law firm and areas of practice, visit https://www.dn-legal.com/ or contact their offices at 1-833-NH-TRUST.

For those who consider two or more states to be “home”, it is important to understand the legal distinctions between residency and domicile, and the opportunity for tax savings based on where you spend your time.

Residency controls for Income Tax Purposes:  Most states allow you to choose your state of residency, as long as you do not spend 183 days a year in one state.  In other words, its where you aren’t, not where you are, that controls residency.  This is strategic since residency controls for income tax purposes.

Domicile controls for Estate Tax Purposes:  Domicile is more important for estate tax planning, and it is a vital factor in order to preserve as much of your wealth as possible.  Where you spend your last days can have a drastic effect on your family’s inheritance since domicile controls for state estate tax purposes.

EXAMPLES:

 

How a Beloved Dog Earned His Bone

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In February 2017, the CEO of Match.com argued in the State of New York tax court that we was a resident of Texas after having moved there, and therefore a non-resident of New York.  New York claimed that he still owed state taxes.  The CEO claimed that he did not.

While the CEO had factors showing that he had ties to both states, the deciding factor came down to his most beloved possession – his dog – having moved to Texas.  Based on this, the court found that he (and his dog) were Texas residents, and therefore was not responsible for New York state taxes (In re Gregory Blatt 2017)

Donohue, O’Connell and Riley PLLC are a boutique income and estate tax planning firm with six offices in three states.  Their practice focuses on reducing taxes through the strategic and cost-effective use of onshore trusts domiciled in favorable jurisdictions.  They have been serving clients in New York and New Jersey for over 40 years.

The foregoing content reflects the opinions of Advisors Capital Management, LLC and is subject to change at any time without notice. Content provided herein is for informational purposes only and should not be used or construed as investment advice or a recommendation regarding the purchase or sale of any security. There is no guarantee that the statements, opinions or forecasts provided herein will prove to be correct. Past performance may not be indicative of future results. Indices are not available for direct investment. Any investor who attempts to mimic the performance of an index would incur fees and expenses which would reduce returns. Securities investing involves risk, including the potential for loss of principal. There is no assurance that any investment plan or strategy will be successful.

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