Domicile is a complicated issue. My post on Domicile and Residence, a MSRRA Issue, has remained popular in the four years since I've written it, and it continue to receive comments and questions. That is a testament to the timelessness of this issue.
If you're not sure why I'm writing about this, I recommend you read Domicile and Residence, a MSRRA Issue. Then, you'll know why I am writing this piece.
Whether you're trying to establish domicile in a new state, or trying to make sure that you don't accidentally lose domicile in your old state, you need to the various factors that are usually considered in determining domicile. It really benefits you to be thoughtful and consistent in your choices so that it is quite clear which state you consider your domicile.
We all know that sometimes it is easier to just transact some business in the state in which you live. However, every time you establish ties with another state, you undermine the domicile that you have in your home state. Obviously, there is a line here. No one would suggest that you not buy a house just because it isn't in your home state. However, if you accept a homestead exemption on your property taxes in that state, then you are possibly opening yourself to questions about your actual domicile. With each choice that you make, you are strengthening the case for domicile in one state or another. Makes sure your choices are reflecting your true intent.
Here are the major issues, and the ways you want to prevent problems:
Income Taxes
The major reason why people fight to maintain domicile is income tax. Ironically, it is also a key indicator of domicile. If you are paying income tax to a state, then you are claiming that you consider it your home.
Voter Registration, and Actual Voting
The place where you vote is important. Once you've established your right to vote in your state of domicile, don't give it up for convenience. Technology and communications have improved so much that absentee voting is not as difficult as it was in the past. Make sure you continue to cast your ballots in the elections in which you are eligible to vote.
This one is hard for me: we have lived, off and on, in the same state for several duty stations. I want to be able to vote there. However, it is not the state of my domicile and I don't want to do anything that makes my intent unclear.
Driver's Licenses
Unfortunately, the Military Spouse Residency Relief Act (MSRRA) makes no provisions for military spouses to maintain their driver's licenses in the state of their domicile. Therefore, military spouses become subject to the rules of the state in which they are physically living. Thankfully, most states are pretty generous and allow military spouses to maintain their driver's licenses in states where they are domiciled.
The primarily thing to keep in mind here is that it is can be very difficult to go back to your old state. Even when you're in a situation where it would be easier to just get a new license in the state where you're living, you should make the extra effort to maintain your driving license in the state where you are maintaining your domicile.
Vehicle Registrations
This is an area where it is sooo much easier to just register a car where you purchase it. Registering a vehicle at an out-of-state location is usually complicated. Plus, some states are more expensive than others. Who wants to pay $91 to Oklahoma when they can pay $15 to Nebraska. Again, you have to look at this decision from the perspective of establishing domicile and intent. Which choice is going to support your domicile decision?
Legal Documents
When preparing legal documents, such as wills and powers of attorney, you are required to indicate which state you are domiciled. Be consistent across all documents and each renewal of the documents to establish your intent.
In addition, carefully consider where you create and maintain any businesses. Some businesses sensibly must be created and maintained in the state where they are physically located. If you open a restaurant, you're going to have to have it based where it is located. However, if your work is location independent, then consider forming your organization in the state in which you are domiciled. (Please consult with your lawyer and/or accountant on this subject; I am neither.)
Homestead or Resident Exemptions
If you own a house, you may be eligible for certain property tax breaks if you claim the property as your primary residence. There is a bit of a trick here, though. With most homestead or resident exemptions, you are establishing that you are a resident of that state. This would directly contradict whatever is said by your other actions. In addition, many states automatically apply the homestead exemption to your property tax bill when you indicate that you are occupying the property as your regular residence.
While it will increase your property tax bill, you must ensure that you are not receiving a homestead tax credit on a property that is not in your state of domicile.
While these are the major issues, some court cases have come down to more trivial actions. Here are some things that have been considered:
- The address listed on bank accounts, and the physical location of the bank in which the accounts are held.
- Ownership of real property.
- Location of family and friends.
- Location of important physical property.
- Physical location.
- Community Involvement
- Location of professionals, such as lawyers, accountants, and doctors.
Obviously, some of these things are hard for a military family to establish. I'm not going to join the Tampa Garden Club just because I'm a Florida resident. However, it can be helpful to consider these things. Do you have a bank account that is based in the area you are calling "home?" If you PCS overseas, who do you ask to hold your most treasured things, and where do you live? Do you regularly visit friends and family in your state of domicile? Have you chosen a lawyer and an accountant based in that state?
There are no single right or wrong answers here. Domicile is based almost entirely on the concept of "intent:" where do you consider home and where do you intend to live for the indefinite future? Where would you live if you were not in the military?
Individual small actions can not strictly define your state of domicile, but the collective impact of those small actions can clearly point to one state of domicile over another state of domicile. Be sure that your actions show your intent, even when they aren't the easiest or least expensive choices. If you do these things consistently, your intent will be clear and your domicile should not be questioned.
For more information on related topics, please see:
Domicile: It's All About Intent
Domicile and Residence, A MSRRA Issue
Tax Filing As A Military Spouse
