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Sacramento Estate Planning Attorney

Why is it important to clearly establish a domicile?


As Joan Rivers' passing last year illustrated, the proof of a person's domicile can have tremendous ramifications on a person's estate, in particular the amount of state estate tax a person may be liable for. California, which has not had an estate tax since 2005, would be a much more preferable state of domicile in Joan Rivers' case, as opposed to New York, where estate taxes can be upwards of 10 percent of the entire estate. Since Rivers spent time in both California and New York, the question of her true domicile is still up in the air, and it will be interesting to see how the court finds in this high profile case.

The fact of the matter is that the distinction between a person's residence and their domicile isn't always entirely clear, and in many cases the same location can be both. Many states define "residence" differently, but in the most general sense a residence means a place where a person resides at the time, or some of the time. For income tax purposes, the state of residence can be a very important distinction. A person can have more than one residence, and in fact they can have numerous residences in many different states, but for income tax purposes the residence in which they spend more than half of a year is their residence. If they don't spend at least half a year in one state, the issue becomes more complicated.

Unlike a residence, a person can only have one domicile, and it probably doesn't change quite as frequently as their place of residence might. Everyone has one, and only one domicile, which is defined as the place in which the person intends to return to or remain indefinitely. So, just because you vacation at a residence in New York, if your intent to return to your domicile in California remains, then California will continue to be the domicile.

From an estate tax standpoint, the state of domicile is important. It decides which state's law will apply, which can have big tax implications, but also choice of law implications that could affect how the estate goes through the probate process. Getting more information on these complex estate planning issues is always a good idea.

Source: AFSA "Residence and Domicile," accessed Jan. 18, 2015

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My Sacramento law practice, Michael A. Sawamura, Attorney at Law, focuses on wills, trusts and estate planning law in addition to business law and corporate defense services. My clients include professionals, government employees, small businesses, blue-collar workers and national corporations.

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