Domicile is a Matter of the Heart
By Jill Ciccarelli Rapps & Kim Ciccarelli Kantor | Naples Daily News: Estate Planning Special Edition 2015
The sunshine, soft ocean breezes and lower taxes makes Florida a popular place to live. Generally speaking Florida domicile brings with it tax advantages over domicile in other states with respect to income taxes, state estate taxes, and homestead.
A person may have several residences at the same time, but in theory may be domiciled in only one place at any given time. The term domicile means the place where the taxpayer has his or her true, fixed permanent home, for legal purposes. Domicile is a matter of intent and requires a serious commitment that may entail a change in lifestyle and the ability to break ties with his /her old state. Many auditors consider five primary factors when considering place of domicile: home, active business involvement, time, items near & dear, and family connections.
A consideration may be to the size of home maintained in the old state vs. the domicile state. As far as business is concerned, a consideration to control and supervision, the taxpayer’s role in the business, pattern of activity, and whether it is a passive or active investment. Of course time is important, the number of days spent in your previous state vs. domiciled state. Your timing and duration of visits also play a role in determining intent. Items that are near and dear to you should be kept in your domiciled state; receipts and documents showing the transport of these items could be important to keep. Also anything that has strong sentimental value including family picture albums should be kept in your domiciled residence. Other factors, like changing address forms, shifting banking and investment relationships, various registrations, church affiliations should all be maintained in your domiciled state. Be careful even the smallest affiliation as a fishing license from your old state could wreak havoc.
The other benefit to establishing domicile in Florida is the Florida homestead exemption. This exemption can protect your home from creditors (with four exceptions), give you a credit against your homes assessment for tax purposes, and cap your property taxes to the lesser of 3% or the rate of inflation (“Save Our Homes”). Because of the “portability” provision, a homesteaded owner may now move up to $500,000 of the “Save Our Homes” benefit from one Florida home to the next. Florida homestead may also protect spouses for inheritance purposes with a life estate or a 50% interest in lieu of a life estate unless the spouse waives these rights in writing.
Exemptions are only available on an individual’s primary home. To qualify you must be a permanent resident of Florida as of January 1st of the year in which you apply for the exemption and file with the local county property appraisers office. If you moved into your residence in 2014 you have until March 1st to file for your 2015 homestead exemption, and have your assessed value capped for 2016.
If you are considering a change of domicile to Florida, it is important to discuss the advantages and disadvantages with your financial advisor, your CPA and your attorney. Domicile should be looked at not only with a tax perspective but also with an estate perspective regarding rights of spouse and children at your death. An advisor versed in the steps for new domicile can provide a more complete package of instructions and discuss planning opportunities to help assist you in your decision to domicile.
