If You Are A Snowbird Considering A Domicile Change From New York To A Florida Domicile That May Trigger A New York Audit, Consider The Following:
What Adverse Consequences Might Result From A Change Of Domicile?
A change of domicile should not be taken lightly. Once the change of domicile occurs, you become subject to the laws of Florida rather than the laws of New York. Those laws are not always the same and may affect marital rights, property rights, insurance coverage and other matters. Before making any change in domicile, such other possible adverse consequences should be considered.
Once a couple changes their domicile to Florida, they will be generally governed by the laws of Florida rather than the laws of New York. Where one of the spouses has been previously married and has children of that marriage, the change of domicile may have a significant affect on marital rights.
If a divorce or separation should occur after the change of domicile to Florida, the results may be different than if the separation or divorce had occurred while both were New York residents. Where this is a concern, each spouse should seek separate counsel prior to making a change of domicile to assure that by doing so, unanticipated results will not occur if a separation or divorce takes place. Similarly, each should seek separate counsel before making a change of domicile to determine whether any significant rights may be affected if, upon the death of one, the other is dissatisfied with the testamentary provisions and seeks to elect against the Will.
We have already discussed in the session on Florida homestead the fact that the Florida Homestead Laws may give significant rights in the Florida home to the surviving spouse and to children. This may be contrary to the testator’s wishes especially in the context of a second marriage.
Before making a change of domicile, there should be a discussion with health care providers to make sure that the change of domicile will not affect the benefits received. This may be especially important where there is an existing contract for long term care that limits certain benefits to New York residents.
A change of domicile from New York to Florida may also trigger an increase in automobile insurance when the registration is changed from New York to Florida.
The change of domicile will generally be predicated on the fact that the Florida home is the principal residence. If it is the principal residence, the “Floridian” may not be able to take advantage of the Internal Revenue Code rollover provisions and capital gain exclusions if the New York house is sold at a later date at a gain.
Perhaps the biggest “downside” is the necessity to be not present in New York State for more than 183 days in a calendar year. What if you really want to visit New York for an unanticipated event, but have run out of your allocated number of days?
One of the first things that should be accomplished when a domicile change occurs is to execute a Florida Will. This should only be done with the advice of an attorney admitted to the Florida Bar. Although many of the rules applicable to New York Wills apply to Florida Wills, they are not all the same. For example, in Florida an executor is generally referred to as a “Personal Representative” and if the Personal Representative is a nonresident of Florida, that individual must be related to the testator in order to qualify. Thus, the individual you named as your executor under your New York Will may not qualify as a Personal Representative in Florida. A “non-contest” clause under certain circumstances may be valid in New York but may not be valid in Florida.
What if an auditor challenges your change of domicile? Although you may be ultimately successful, you may be subject to substantial expenses and aggravation in proving that your domicile change was appropriate. If it is ultimately determined that you did not effectively change your domicile, there may be not only substantial back taxes to pay but also hefty interest and pentalties.
A complete review of all pertinent facts should be made by a professional advisor to make sure that there are no other surprises that may occur when the change of domicile takes place.