Change in Domicile from New York to Florida Can Help Minimize
Allan R. Lipman
2007 - Retirees who have homes in both New York and Florida
may be able to reduce or eliminate New York income and estate
taxes, and also reduce the real estate taxes on their Florida
home by changing their domicile to Florida. The benefit of
doing so has been enhanced by the elimination of the Florida
estate tax and the repeal of the Florida intangible tax on
stocks and bonds, which went into effect on January 1, 2007.
It has been further enhanced by the Florida constitutional
amendment that places a cap of 3% on any annual increase in
assessments applicable to a Florida homestead, but not to
a Florida home owned by a New Yorker.
Retirees who have a substantial
securities portfolio have benefited from the 15% federal
income tax on stock dividends and capital gains. In contrast,
both the dividends and capital gains are subject to New
York income taxes at a rate as high as 7%. Similarly, Congress
has increased the federal estate tax unified credit to $2
million, while New York continues to impose its estate tax
on estates greater than $1 million. The failure of New York
to give comparable tax relief has motivated many New Yorkers
with homes in both New York and Florida to consider a change
of domicile to eliminate New York income and estate taxes
in their entirety.
to Determine Eligibility
all retirees who own homes in New York and Florida are eligible
to elect Florida as their domicile. Domicile is characterized
in the New York tax regulations as the place that an individual
intends to be his permanent home and the place to which
he intends to return whenever he may be absent. The regulations
provide that, once established, a domicile continues until
the person moves to a new location with the bona fide intention
of making his fixed and permanent home there. A person’s
declarations are given due weight, but they will not be
conclusive if they are contradicted by conduct. For example,
the regulations state that registering and voting in one
place is important but not necessarily conclusive. Likewise,
the length of time customarily spent at each location is
important but not conclusive. A person can have only one
domicile. If an individual has two or more homes, the domicile
is the one regarded and used as the permanent home.
leading case in New York was decided by the New York Court
of Appeals in 1908 (Matter of Newcomb, 192 N.Y.
238). It remains “good law.” Mrs. Newcomb, during
a 30-year period, and until she was 80, was domiciled in
New York City. She generally resided during the winter in
her home in New Orleans and resided during the summer in
her residence in New York City. She wanted to make substantial
bequests to Tulane University and was concerned that the
will might be contested by her relatives. She consulted
with a Louisiana attorney, who advised her to change her
domicile by making an express declaration in writing to
that effect. She signed a declaration stating that New Orleans
was her permanent home and her place of domicile. It was
argued that Newcomb resided in New York City and merely
visited New Orleans, and that her later visits to New Orleans
differed in no material respect from those made earlier.
It was also argued that she sought to become a nominal resident
of Louisiana merely for the purpose of making a Louisiana
will and not for making a permanent home. The court rejected
that approach and established the following rules for determining
domicile when the retiree maintains two residences:
There must be a present, definite, and honest purpose
to give up the old place and take up the new place as
Every retiree may select and make his or her own domicile,
but the selection must be followed by proper action. Motives
are immaterial except as they indicate intention.
A change of domicile may be made through caprice, whim,
or fancy; for business, health, or pleasure; to secure
a change of climate or a change of laws; or for any reason
whatsoever, provided that there is an absolute and fixed
intention to abandon one and acquire another and that
the acts of the persons confirm this intention.
A retiree may elect between a winter and summer residence
and make a domicile of either, provided she acts in good
The right to choose implies the right to declare one’s
choice, formally or informally, as he or she prefers,
and even for the sole purpose of making evidence to prove
what the choice was.
No pretense or deception can be practiced, for the intention
must be honest, the action genuine, and the evidence clear
and convincing. The burden of proof rests upon the party
who alleges a change of domicile.
who elect to make Florida their permanent residence should
demonstrate such intention in a clear and convincing way
by taking as many of the following steps as appropriate:
File a declaration of domicile.
File for a Florida homestead exemption.
Obtain a Florida driver’s license and relinquish
a New York license.
Acquire Florida license plates and relinquish New York
Register to vote in Florida and remove oneself from the
New York voting rolls.
File a nonresident, rather than a resident, New York income
tax return if there is New York–source income.
File a federal income tax return with the IRS Center in
Transfer safe deposit box contents to Florida and close
out a New York box.
Open a Florida bank account.
Change credit cards to the Florida address.
Execute a new Florida will, Florida durable power of attorney,
and Florida health care proxy.
Refer to Florida residence in all trusts and other legal
Affiliate with Florida organizations and consider disaffiliation
with New York ones.
Have family gatherings and social activities centered
in Florida rather than New York.
Affiliate with a church or temple in Florida.
If investing in real estate or businesses, focus on areas
in Florida rather than New York.
Transfer works of art, expensive furniture, heirlooms,
and other valuable personal items to Florida.
Consider acquiring cemetery plots in Florida.
List the Florida residence as the primary residence on
all homeowners insurance.
Turn in any New York resident fishing or hunting licenses.
License pets in Florida.
If a retiree is a New York notary public, resign and become
a Florida notary public.
Cancel any New York real estate STAR exemption.
Stay in Florida as long as practically possible each year.
Consider acquiring a larger or more expensive home in
Florida, or remodeling or redecorating it, and acquiring
a smaller or less expensive home in New York, and document
any steps taken in doing so.
If a physician has advised that either extremely cold
weather or hot, humid weather may be harmful to the retiree’s
health, the physician should document the medical issues
change of domicile from New York to Florida will not save
any New York income taxes if the retiree is present in New
York in a calendar year for more than 183 days. Taxpayers
will be considered “statutory residents” of
New York only if they maintain a “permanent place
of abode” in New York and are present in New York
for more than 183 days. A diary should be kept, and a partial
day is considered a full day. Therefore, if a retiree leaves
New York at 6 a.m. on Friday morning and returns at 11 p.m.
Sunday night, he will be considered absent from New York
for only one day. In addition to a diary, the burden of
proof as to the taxpayer’s physical presence can be
onerous. The taxpayer should retain as much documentation
as possible to support the entries in the diary. Failure
to account for a day will be presumed by auditors to be
a day inside New York. There are some exceptions to the
general rule, such as when a retiree is confined to a New
York hospital or is present in New York only to go to or
from an airport.
in New York Income Taxes
income derived from, or connected with, New York sources
will continue to be taxable in New York even if paid to
the retiree after a change of domicile to Florida. For example,
New York will tax items such as the distributable share
of income from a former law or accounting partnership and
rental income from New York real property. New York will
not continue to tax income from annuities, dividends, and
interest, even if from New York sources, unless the income
is from property employed in a business, trade, profession,
or occupation carried on in New York. In 1996, Congress
passed legislation that prohibits New York from imposing
its income tax on any retirement income of an individual
who is no longer a resident or domiciliary of New York.
To quantify the savings in New York income taxes, taxpayers
may want to restate the most recent New York resident income
tax return on a nonresident return and include only New
in New York Estate Taxes
amount of New York estate tax is based on the net taxable
estate as shown in the Exhibit.
The following simplified examples illustrate the magnitude
of the estate tax savings that will result from a change
of domicile to Florida:
If a former New Yorker has changed his domicile to Florida
and dies with net assets of $10 million (none of which
are in New York), his estate will pay federal estate taxes
of approximately $3,680,000 and no New York estate taxes.
If that same individual had not changed his domicile to
Florida and all his assets are in New York, his estate
will pay New York estate taxes of approximately $1,067,600.
That amount will be deducted on the federal estate tax
return and the federal estate taxes will be reduced from
$3,630,890 to $3,190,000. Thus, the estate will pay a
total of $4,257,600 versus a total of $3,680,000, a difference
If that same individual has changed his domicile to Florida,
but at the time of his death owned a home in New York
valued at $1 million, his estate will pay a federal estate
tax of $3,630,890 and a New York estate tax of $106,760
for a total of $3,737,650. Thus, the estate pays additional
net estate taxes of $57,650 because the home is located
in New York. Note the computation of the New York tax
starts out with a calculation of a New York tax on all
assets wherever located and then applies the applicable
percentage (one-tenth of $1,067,600).
A retiree dies in New York with an estate of $1,500,000.
His estate will pay a New York estate tax of $64,400.
There will be no federal estate taxes because of the $2
million threshold (i.e., equivalent to the federal unified
credit). If the decedent had changed his domicile to Florida
and had no assets in New York, there would be neither
a federal estate tax nor a Florida estate tax. If the
$1,500,000 included a New York home valued at $500,000,
however, then there would be a New York estate tax of
$21,465 (one-third of $64,400).
As indicated in the above examples, even if there is a change
of domicile, New York will nevertheless impose a New York
estate tax on real property and tangible personal property
having any actual situs in New York. If retirees decide
to change their domicile to Florida, it may be desirable
to transfer the New York home to a limited liability company
or other similar entity. Because shares of the limited liability
company constitute intangible property, they should not
be subject to New York estate taxes even though the entity
owns real property in New York.
and Domicile Change
married couples have the same domicile. When a change of
domicile occurs, both spouses change their domicile at the
same time. The primary residence of one is the primary residence
of the other. But consider the situation where they have
a home in New York and a home in Florida and the wife stays
in Florida from mid-October until mid-May and is not in
New York for more than 183 days during a calendar year.
On the other hand, the husband returns to their New York
home one week a month for business reasons while his wife
stays in Florida. As a result, he is in New York for more
than 183 days in each calendar year, although his wife is
not. The husband and wife file a joint federal income tax
return. The husband files a resident New York tax return.
The wife has no New York–source income and files no
New York tax return. The wife has substantial income from
her stocks and bonds. The Florida home is titled in the
wife’s name. She files a declaration of Florida domicile,
registers to vote in Florida, receives a homestead exemption
on her Florida home, and follows many of the items on the
checklist. As a result, there is a 3% cap on any increase
in its assessment. A New York auditor claims she must pay
New York income taxes on the dividends and interest she
receives because she has not effectively changed her domicile.
The auditor points out that her husband retained a significant
tie to a New York business and, therefore, she cannot change
her domicile to Florida. The auditor cites the New York
and wife. Generally, the domicile of a husband and
wife are the same. However, if they are separated in fact,
they may each, under some circumstances, acquire their own
separate domiciles even though there is no judgment or decree
of separation. Where there is a judgment or decree of separation,
a husband and wife may acquire their own separate domicile.
[20 NYCRR 105.20(i)(5)]
regulation should be changed. A 2005 decision of the New
York Court of Appeals recognizes that spouses can each elect
their own domicile (Glenbriar Co. v. Lipsman, 5
N.Y.3d 388). Although the case involved an issue related
to a rent stabilized residence in New York City, its reasoning
appears to sanction a change of domicile by one spouse while
the other remains a New Yorker.
change of domicile makes the laws of Florida, rather than
New York, applicable, including marital rights. Although
a New Yorker may have the requisite intent to make a domicile
change, if challenged, such intent must be demonstrated
by clear and convincing evidence, which requires a high
degree of proof. The lack of such evidence may result in
not only an assessment, but also substantial interest and
penalties. Where the result is uncertain, a change of domicile
should not be attempted unless the taxes that will be saved
are substantial. No change should be made without professional
R. Lipman, JD, is a partner in the Buffalo, N.Y.,
law firm of Lipman & Biltekoff, LLP, and also has an
office in Boca Raton, Fla. Some of the matters highlighted
in this article are explored in more depth by the author
at www.snowbirdguide.com where he also suggests how to respond
to a domicile audit.