Comedy and entertainment pioneer Joan Rivers left a legacy of laughter and success to her family, as evidenced by the $150 million estate she left behind to family and loved ones. What nobody is laughing about, however, is the fact that an apparent ambiguity in her estate planning documents could end up costing her estate millions in state estate taxes, depending on the outcome of the case.
Joan Rivers’ will stated that she was a resident of New York and her will was filed in a New York court; however, in her will, Rivers declared herself to be a domiciliary of the state of California. In general, in estate and trusts law, the state in which a person was domiciled at the time of his or her death is the state whose laws shall apply to the estate and probate proceedings of the deceased.
Domicile is a concept that is often misunderstood, but that can have tremendous implications in complex estate planning. A person can have several residences; for example, a person may own a home in California, New York and any other number of states. However, these residences may not be the person’s domicile for legal purposes. A person may only have one domicile, which is defined loosely as the place to which one intends to return on a permanent basis. So, in most cases, the question of domicile is the place to which a person has the most permanent and continuous connection. This is sometimes considered the residence of the person at the time of his or her death, but not always.
The question of domicile will be huge for Rivers’ estate, especially when it comes to paying estate taxes. If the domicile is New York, her estate may be subject to estate taxes to the tune of some 16% percent, which could roughly translate into $25 million in taxes taken straight from the family, friends and charities to which Rivers intended to leave her assets. However, if her domicile is California, which has no estate tax, her intended heirs will be able to enjoy a greater portion of their inheritance.
Source: Wealth Management, “Death and Domicile-No Joking Matter,” Charles Douglas, Jan. 5, 2015