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David Toback, Attorney at Law
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Your State of Residence Can Have a Big Tax Impact on Your Estate

Where do you live? This seems like a simple question. But for many, it can pose significant estate planning issues. And the answer to it can make a difference of millions of dollars in estate taxes that you or your beneficiaries may have to pay.

Why Your Home State Matters

This is a particularly difficult issue in Florida, where many people have summer homes, beach homes, or retirement homes. Initially, they may spend only a few weeks a year in Florida, but eventually, they may divide time evenly between their home state, and Florida. Even if they move to Florida, they may retain property in their prior state, to be rented out, or as an investment. The question of where someone actually lives then becomes somewhat more complex.

During your lifetime, of course, your home state can determine your income tax rate. But afterward, the state estate tax can be as high as 20% in New York, to as low as zero in states like Florida. Clearly, there’s a benefit to declaring your home state in Florida, if you have estate property to be devised.

Residence vs. Domicile

The law allows you to have only one true domicile. You can have multiple residences, but can officially live in only one state. Your home state is the one that you will always come back to, the one that you call home.

There is no one way to officially determine your state of residence, but there are things you can do to help. For example, you can establish your Florida home as your homestead, if you own it. You can change your estate planning documents to reflect your home state.

Other things, like finding professionals (doctors, accountants, etc.) in Florida, and having records transferred here, as well as being a registered voter in Florida, can assist you. In other words, if you want to establish that you are a resident of a given state, you should do everything you can to establish your life there.

Joan Rivers Estate Has Similar Issues

The estate of popular comedienne Joan Rivers is, in fact, having issues with her estate plan, in that her estate documents declared that her property be subject to California’s estate laws (which provide for no state estate taxes), even though she lived in New York. It’s not known how that issue will turn out, but the extra measures she took to try to fall under California’s estate laws may end up saving her family millions in estate taxes.

Remember that other states may have other advantages beyond just estate taxes, so before you change your official domicile to any state, you should make sure that it benefits you overall. While you can have your main probate in your state of domicile, you can have additional ancillary probates in other states in which you own property.

What’s the probate system like in each state? Will state income taxes override any benefit of estate taxes? Changing your state of domicile has many implications, and many different factors should be considered.

Make sure that what you want to do with your estate and your property isn’t affected by what happens in your life. Contact Tampa business and probate attorney David Toback to help eliminate ancillary probate and discuss your needs to make sure your estate planning documents are up to date, and reflect your intentions.

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