What should you do now to implement some of the suggestions we have discussed in this Seminar if you are a snowbird who has already changed to a Florida domicile or are considering doing so and how may we assist you?

 

Kelly V. Zarcone. a member of the New York and Florida Bar
Kelly V. Zarcone. a member of the New York and Florida Bar

 

Now that you have reviewed all or selected portions of our Sessions, you may ask – – – What should I do now?

We welcome the opportunity to work with you and/or your professional adviser.

We generally proceed in the following manner:

  • We review  all of the factors that are likely to be taken into account if you change your domicile and you are audited by New York State.
  • If after such review, we believe that you qualify for a change of domicile, we assist  in implementing the checklist and items discussed in Session 2.
  • We prepare a Statement of Domicile Change that recites in detail reasons for the domicile change and all the steps you have taken to effectuate the change, together with an attachment that contains all of the supporting documents.  An audit, if it does occur, may not occur for several years.  We have found that such a statement becomes very useful if and when an audit occurs.  It is not given to the auditor but used as a source to develop an appropriate strategy on the audit.  It is especially useful if the audit takes place after a death occurs or dementia sets in.  It should also be useful in connection with an estate tax audit if a domicile issue arises.
  • We review your existing estate plan  and , if you have not already done so, the advantages of executing a Florida Last Will and Testament, Florida Living Trust (if you desire to have one), a Florida Durable Power of Attorney, Florida Health Care Proxy and a Florida Living Will. We are often assisted in doing so by your local attorney and financial planning professional.
  • If any tax returns are filed, we will work closely with your accountant, if requested
  • If and when an audit occurs, we are prepared to appear on your behalf if you desire us to do so.

We cannot guarantee a favorable result if an audit occurs, but will work with you in an attempt to reach a favorable outcome.  If you wish to retain us for any of the above services, please contact us.

As an additional feature, we think you will enjoy some           ” words of wisdom” from attorney John Brenon as to his litigation approach.

Litigation Approach

 

 

John G. Brenon, a member of the New York Bar
John G. Brenon, a member of the New York Bar

 

Many affluent individuals have acquired or plan to increase the use of a second home in southern Florida. Florida has neither a personal income tax nor a state estate tax. But New York has both. Does this present an opportunity to avoid or reduce state income and estate taxes as well as escaping cold winters and reveling in the sunshine?

Many so called “snowbirds” think so and decide to treat themselves as Floridians, in part, to avoid or minimize state income and estate taxes.

New York State is the most aggressive state in the northeast, actively ferreting out snowbirds who are not able to effectively prove their intent to make Florida their primary residence and those who are present in New York for more than 183 days in a calendar year..

The audit process is often triggered when the snowbird stops filing any New York resident New York income tax return or switches to a non-resident return. Once the snowbird decides to do either, he or she should assume that an audit will occur and plan well in advance a persuasive response if and when a New York State tax audit domicile is initiated. The most recent New York Department of Taxation and Finance Revised Audit Guidelines direct the auditor to initiate an audit by focusing on five primary factors:

(1) Use and maintenance of the NY home compared to those of the FL residence, with emphasize on comparing the values and sizes of the homes.

(2) Continued active business involvement, if any, in New York.

(3) Comparison of your time in Florida, New York and other locations.

(4) Location of items “near and dear”

(5) Family connections

Failing to properly respond to the five domicile factor inquiry can be critical. When our firm is retained, one of the first things we do is to contact the auditor and advice he or she to deal exclusively with our firm and have no direct contact with our client.We then conduct our own audit so we can better respond to the “real” audit. Our response is customized to take into account all facts, good and/or bad. We work with the client to develop a truthful "spin" on the facts to hopefully convince the auditor to resolve the matter in our client’s favor.

Here are some examples of some approaches we have successfully utilized for our clients.Lets call them “John and Mary”:

Auditor: I reviewed the tax assessment records for your client’s New York and Florida homes. The one in New York is much larger and more expensive.

Response: The New York one may be bigger and cost more but our clients also own a percentage of the Florida Home Owners Association and therefore also own and have the use of a 50,000 square foot club house, two eighteen hole championship golf courses, three Olympic size swimming pools and twenty tennis courts. Our clients are trying to sell their New York house and downsize and intend to do so when the market for older houses picks up. In the meantime, they consider it is a good investment. The bedroom in the New York house is on the second floor and Mary finds it difficult going up and down the stairs.

Auditor: I looked your clients up on Google. John was president, and is now chairman of the board of the family New York business and his son in now president. Is John still working there?

Response: John is now retired and receives no compensation. He is so bored when he is in New York that he stops in the office once in a while. After all, he still own some stock. He does give his son some advice, but he seldom follows his suggestions. Occasionally, he has lunch with some of the older customers and talk about the earlier years.

Auditor: What about those paintings, works of art jewelry and coin collection that are listed on the New York homeowners policy?

Response: Our clients keep some of the items that are “near and dear” to them in the New York house because they are safer, and there is more room to store some of the items in the basement. Their home in Florida, like most homes in south Florida, does not have a basement. But they keep photos of some of the art in Florida so they can appreciate them even when there.

Auditor: Last year, your clients spent 175 days in NY, 170 days in Florida and the rest of the year on a cruise to Europe.

Response: True, but It is the quality of the time that counts, not the quantity. When they are visiting in New York they are bored. Every day in Florida is an active day. You should add the cruise days to the Florida days, not the NY days. The primary reason they spend as much time in New York as they do is to avoid the hot, humid weather and the hurricanes.

Auditor: I see on Facebook that some of your client’s grandchildren live in New York.

Response: They feel much closer to their grandchildren when they are in Florida. They do not get along with their daughter- in- law so they are better off limiting their conversations with their grandkids on Skype once or twice a week when they are in Florida. They practically never see them when they are in New York.

The auditor may bring up some other points. Where you have indicated that there is a reasonable answer, we will assert it. For example:

* Our clients continue to be treated by their doctor and dentist up north because they have been treating them for years and have great qualifications. In an emergency, while in Florida, they go to Emergency Care.

*Why should they give up their New York stock broker and their New York bank where they all know them personally and give them great service? They can contact them just as easily from Florida.

* True they both\ use to be very active socially up North. But most of their friends have either died or moved away. Both of them are now more active socially in Florida. There are so many activities at their Club, they are kept busy all the time. They go out for dinner and often lunch almost every day with friends. When they return up North in the summer, the old neighborhood is no longer what it used to be and they feel like strangers.

Of course, we insist that our clients always tell the whole truth but, as JK Rowling pointed out in her novel, Harry Potter and the Sorcerer’s Stone, truth is a beautiful and terrible thing, and should therefore be treated with great caution. An auditor is likely to put a reverse spin on the facts so although we are always truthful, we are always cautious and do not volunteer any information not specifically requested.

Most domicile cases are settled without out the necessity of any court appearance. This is especially so if the Tax Department knows we are very well prepared and ready, willing and able to go the full route.