Highlighted by Daniels v. Commissioner
Navigating the complexities of estate tax can be challenging, especially when determining the domicile of a taxpayer with residences in multiple states. In the recent Connecticut Superior Court case, Daniels v. Commissioner, the court faced the intricate task of establishing the domicile of a wealthy individual who divided his time between Connecticut, Florida, and Arizona. This case highlights the importance of understanding how courts assess domicile based on intent and lifestyle, providing valuable insights for taxpayers aiming to change their domicile while maintaining significant connections to their original state.
The case determined the domicile of a wealthy taxpayer who spent 5.5 months in Connecticut, 3.5 months in Florida and 3 months in Arizona each year from approximately 2006-2015.
Because domicile is a question of intent, courts often look to an individual’s manner of living to make the determination, and the court acknowledged that the task was made even more complicated in this case by the decedent’s financial resources and his “peripatetic lifestyle,” including the fact that he was wealthy enough to own multiple homes in multiple states that the court each determined to qualify as a primary residence.
Despite the taxpayer holding a Florida driver’s license, having registered to vote in Florida, maintaining a local banking account and declaring himself a Florida domiciliary, the court determined that the decedent was domiciled in Connecticut at the time of his death and liable for approximately $13 million in Connecticut estate taxes. The court downplayed the significance of these factors, saying that each was a “one-time, administrative task accomplished with little more than an afternoon’s or a day’s effort, and carry[ing] little practical significance in or impact on [the decedent]’s day to day life.”
The court weighted these “one-time administrative elections” against the decedent’s intent as demonstrated by his actions over the years. The court again acknowledged that “the idea of a ‘permanent’ home is a somewhat ill-fitting concept in this case” because of the decedent’s practice of moving around the country but found that he maintained a “more lasting connection to Connecticut than any other state” and said “where [the decedent] chose to spend his time is a more persuasive indicator of [his] intent.”
While the ratio of time the decedent spent between Florida and Connecticut was important to the determination of domicile, the court also stressed that the decision was based upon “the combination of the amount of time spent in Connecticut, together with the full personal, social, and property connections maintained by [the decedent] over that same time period, that the court considers persuasive in determining domicile.”
This case is an important reminder for taxpayers wishing to change their domicile while maintaining a home in their original state and significant personal connections with the state. In addition to completing the administrative tasks, it is imperative for taxpayers to maintain a consistent course of action demonstrating the intention to abandon domicile in their original state, which is primarily demonstrated by where the taxpayer chooses to spend their time.