If you own a residence in another state and you are under the impression that all you need to move your domicile to a “Sunshine State” is to get a Driver’s License with your new mailing address or register to vote, think again.

High-tax states, such as New York, New Jersey, Connecticut and Massachusetts, make it quite complicated and consider a long list of both hard and soft factors that govern domicile and residency.

It is important to realize that domicile controls for estate tax purposes, whereas residency controls for income tax purposes.

Most people are concerned about both to some degree, but particularly for New York residents, the estate tax issue is a big one. In New York, if you have an estate just slightly north of the $5.7M threshold, known as the “cliff”, New York will tax your estate from dollar zero forward.

In line with our focused on foresight theme for 2020, consider this real life story as a lesson to understand the myriad of domicile requirements.

We have a client who passed away recently. We will refer to him as Lou Patterson for illustration purposes.

Lou Patterson thought he had done everything he needed to do to claim Florida as both his residency and domicile, but he didn’t satisfy all of the requirements and New York still considered Lou a New York domiciliary for estate tax purposes.

Lou traveled a lot for work and stayed out of New York adequately to claim Florida residency, over 183 days, the bright-line test for residency. As a Florida resident, he filed as a Florida resident for years, so he assumed he would be a Florida resident for estate tax purposes as well.  Turns out, even though his residency transfer was successful for income tax purposes, he failed to cut ties sufficiently with New York for estate tax purposes.

He was found to be a New York domiciliary, based on keeping his house in New York, and maintaining his role as a partner at a New York City investment bank. This decision led to a whole series of tax filings and tax payments that would not have been necessary if he had done just a few things differently.

How does someone learn from this and avoid this financial surprise and headache for themselves?  Unfortunately, high-tax states such as NY, NJ, CT and MA do not have a bright line test. Instead, they keep people guessing and have busy auditing departments who use a long list of circumstances to build their cases.

Short of selling everything and leaving the state forever, they do not want anyone to have 100% certainty that they will not have to pay estate taxes, and have been known to find creative ways to enforce domicile such as cell phone geo location records, EZ-pass transactions and credit card transactions.

For those who call two or more states “home”, consider scheduling an appointment with one of our attorneys to discuss how to mitigate your risk based on our experience with many of these cases.

You can also refer to our Residency vs. Domicile Checklist, and our more in depth articles; Snowbirds: Establishing Residency for Income Tax Purposes and Evaluating New York and Florida’s Domicile Laws for Spouses .

Having only recently gained 20/20 vision after being born severely nearsighted, Joe Donohue, managing member of Donohue, O'Connell and Riley, understands the value of clarity. For him, it's a gift. The ability to see clearly is something he's been working toward his entire life, both personally and professionally. 

The ability to foresee what lies ahead as a person grows old gives him or her peace of mind. When it comes to preparing for the late-in-life trials and tribulations, having a clear plan is truly a gift to everyone involved. Statistically, most people will not die from a tragic, unexpected death, but instead the slow, degenerative nature of aging. Many of their lives will end in an institution with someone taking care of them.

Will You Be Prepared?

The sad truth is that many people are not prepared. They do not take the time to think ahead earlier in life when it matters most. Far too many people have not established who, if anyone, will be supporting them throughout the aging process, leaving them isolated and vulnerable.

Donohue remembers a striking example of an elderly husband and wife who died within a short time of each other. They were a symbiotic couple. She was hard of hearing, and his vision was weak; when he would drive, she would tell him when to turn. They did everything together but had nobody around to support them as they got older – and they had no plan in place. One day, the husband tripped and fell on the wife as they ascended the stairs. They both suffered head trauma, ended up in a nursing home, and died within six months of each other. What was supposed to be a simple outing turned tragic because they lacked a support network. They had nobody around to help them with simple chores and had made no arrangements for themselves as they aged.

Many older people need a lot of assistance to stay independent. They need someone to help keep up with the various bills that will continue to come no matter their ability to manage them. Too often, a medical emergency happens at night, and the elderly patient has to leave the house unexpectedly. Without a plan in place, the house is left unoccupied, which can lead to all kinds of added woes down the road. It's upsetting enough to deal with the trauma of a hospital visit but to have to deal with the further stresses of a burst pipe or a break-in only adds insult to injury.

Our estate, tax and elder law practice ensures that our clients have the appropriate documents in place, so there's always someone advocating for them. Our "Support Circle" strategy makes sure there will always be someone else who's aware of the "big picture." With over 100 combined years in practice, we have seen almost every scenario; our value to you is the foresight we've acquired. We'll help you gather all the necessary information, allowing us to provide you with a clear and bright path forward.

Visit our website or call Donohue, O'Connell & Riley at 844-50-TRUST (844-508-7878).

Donohue, O’Connell & Riley, PLLC is proud to be sponsoring the Exeter Riptide 12U Girls Softball Team as they celebrate their incredible 2019 season, culminating with winning the District Championship for the first time ever at the 12U age group, as well as winning the Litchfield invitational tournament. Joe Donohue’s daughter plays 1^st base for the team.

Their dream season has become even more exciting as the girls were one of two teams invited to represent New Hampshire at the Babe Ruth World Series in Florida July 27-August 2! Our firm is contributing to their fundraising efforts to cover travel expenses for the trip to Florida.  If you would like to donate, please click below:

We are honored to help the team make the most of this opportunity.

Donohue, O’Connell & Riley PLLC is pleased to announce the acquisition of Mann, Mann & Lewis, P.C., welcoming their Nyack-area clients into our estate, tax and elder law practice in Pearl River, New York and growing our Rockland County presence. 

Partners Joseph M. Donohue and Kristin A. Canty met attorneys Orville H. Mann, Jr. & Robert P. Lewis, Jr. through colleagues and found common ground in our longstanding Rockland County legacies and a deep commitment to helping families in the community with quality estate planning, tax and elder law services. Together, we are ensuring a smooth transition of cases and files.

Our team has advised thousands of clients on how to structure their affairs and businesses in order to minimize taxes and assure the smooth transfer of wealth between generations. This merger gives Mann, Mann & Lewis clients the opportunity to benefit from both our local presence and regional scope. With attorneys admitted in New York, New Jersey, Connecticut, Massachusetts & New Hampshire, clients can access New Hampshire’s favorable tax laws (New Hampshire trusts pay no state-level income, estate or sales taxes).

Since life is constantly evolving and keeping your estate plan up to date is of paramount importance, clients are encouraged to call the Pearl River Team of Donohue, O’Connell & Riley at (845) 735-5050 to schedule an appointment. Our legal team can review your documents to make sure everything is current and accurately reflects your wishes. You may also benefit from the latest tax legislation and Medicaid rules.

Our practice takes pride in our personalized approach to client service, so we look forward to a conversation to understand your unique circumstances and tailor our advice to best meet your current and long-term needs.  As you know, planning early is critical to staying in control and protecting the maximum amount of assets possible. Your loved ones and your legacy depend on taking a proactive approach to protecting and passing on your life savings.

Audrey wrote, “The funeral director is very helpful in making the arrangements and will advise what steps should be taken. If possible, it would be advisable to make a few decisions BEFORE setting up an appointment.”

These decisions range from the immediate matter of organizing a funeral ceremony and selecting the nature of the deceased’s burial or cremation to managing financial transfers from the deceased to his or her heirs.

One useful tip is to prioritize settling the affairs and transitioning the assets of the deceased. Be sure to cancel the deceased’s appointments and either cancel or re-direct pension checks and Social Security benefits to a surviving spouse as soon as possible. You should consider adding a co-signer for bank accounts to streamline this process for an elderly parent. 

Compiling all necessary documents of the deceased is also an important step. For example, Audrey recommended ordering copies of the death certificate immediately to be issued to the deceased’s banks, life insurance companies, medical insurance companies, pension companies and the Social Security agency.

She also advised bringing the cemetery deed to the funeral home, as well as preparing checks for expected expenses, including the headstone, the excavation of the grave, funeral fees and fees for ceremony personnel such as an organist.

Making ceremonial decisions in advance, preferably with regard to the previously stated wishes of the deceased, can reduce stress and uncertainty after a loved one passes away. These decisions may include the number of receiving dates, who will serve as pall bearers, whether the casket will be open or closed and the type of flowers that will be present at the ceremony, or whether burial or cremation is desired.

Having a plan can make even the most tragic occasion more manageable and turn it into a celebration of life. By following Audrey’s sage advice, you can spend less time organizing logistics and more time honoring the life and legacy of your loved one.