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Monday, May 24, 2021

The Relevance of “Domicile” in Estate Planning

Where do you live? It sounds like a simple enough question, but the more you really dive into it with some people, it can get more complicated than anticipated. With many people owning multiple properties in different states, and sometimes even splitting time evenly between them, what is considered to be the permanent residence or “domicile” can be difficult to determine. A person’s domicile is considered to be the place where he or she lives with an intent to permanently stay. There is no uniform way of defining or determining domicile and, often, a number of different factors will be considered in its determination. In some states, you can even file a Declaration of Domicile in order to formally establish your intent to make a certain location your domicile. While not dispositive of the issue, something like a Declaration of Domicile can be an important factor to consider in deciding on a person’s domicile.

Why does it even matter where you are domiciled? It can matter for a number of reasons. In fact, domicile plays an important role in estate planning and should be considered when establishing an estate plan. Here, we will go into more detail as to why domicile is important in terms of estate planning.

The Relevance of “Domicile” in Estate Planning

The laws of the state in which you have established domicile at your time of death will rule in terms of probate of your estate. If you properly executed the documents in your estate plan, such as your will, according to the laws of a state other than that where you are domiciled, it is still most likely to be recognized as valid. Most states have laws on the books that recognize the validity of wills and other estate planning documents that are properly executed according to the laws of another state. The laws of the state in which you are domiciled, however, may greatly vary in important ways from the laws of the state in which you executed your estate plan. The impact of this may be that provisions of your estate plan are, essentially, rendered invalid or ineffective under the laws of the state where you die domiciled.

For instance, how the laws of a state address the elective share can have significant impacts on the effectiveness of a person’s estate plan. An elective share is basically a minimum share of an estate guaranteed to a surviving spouse. This means that any estate plan that seeks to intentionally or unintentionally disinherit a spouse or give them less than the provided elective share, can be rendered ineffective on this point. The surviving spouse can claim the elective share which can have a domino effect as it can impact what other beneficiaries of the estate receive as well. If you established your estate plan with the laws of a state other than that of the one in which you pass away domiciled, when the laws of your domicile estate apply, it can upset your intentions in regards to your estate plan.

Furthermore, the tax situation in the state in which you are domiciled can have a significant impact on the value of your estate. Some states, for instance, have a state estate tax that can eat away at the value of your estate in addition to the federal estate tax. In order to preserve the value of your estate, you need to consider the impact of state estate taxes on your domicile state when putting your estate plan in place.

Estate Planning Attorney

While putting an estate plan in place is vitally important, putting an estate plan in place that will effectively accomplish your goals is of paramount importance. The trusted estate planning team at Monk Law is here to help you establish a robust and comprehensive estate plan that serves your goals. Contact Monk Law today.


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