Domicile Planning for Individuals, Estates and Trusts: Key State Tax Issues and Shifting Residency to Maximize Tax Benefits

The laws of domicile impact an individual’s estate plan and wealth planning structures. For this reason, many individuals (particularly those who live in high income tax states such as California, New York, and New Jersey) seek to establish domicile in states with little to no income tax to further estate planning and income tax goals. The panelists will discuss important steps in pre-domicile planning, along with best practices for maintaining the new domicile once it is established in light of challenges from state taxing authorities.

State income tax treatment of trusts can be a substantial expense, as the domicile of a trust impacts the taxes paid by the trust and its beneficiaries. Following the Supreme Court’s recent decision in N.C. Dep’t of Rev. v. Kimberly Rice Kaestner 1992 Family Trust, comprehensive review of the past and current residences of trust grantors, trustees, beneficiaries, and the trust itself to determine whether a change to the trust situs is warranted. There are, of course, benefits to a trust being taxed in a low or no tax state. There are a number of ways to “relocate” a trust, including decanting, moving trust assets, a formal situs change, or a change of trustees. Of course, the laws of the incoming jurisdiction applicable to trusts must also be reviewed in full before the change of situs can be fully accomplished.

Listen as our experienced panel provides a complete analysis of the criteria states use to tax individuals and trusts, and outlines the key elements for shifting domicile from one state to another.