There is a lot of residency guidance out there harping on the importance of taking various administrative steps to change your domicile, like changing your driver’s license, voter registration, vehicle registration, etc. And while those steps are certainly indicative of a move, they are typically less relevant to the final determination, and often can cause taxpayers to lose focus on what we think can be the most important factor in changing your domicile: where you spend your time. Indeed, a poor “time factor” can hamstring an otherwise legitimate change in domicile.
This typical issue arose recently in a less-common way: in a Connecticut estate tax case. In Daniels v. Commissioner, Leslie B. Daniels, the executor of the Estate of Jack Anderson, argued that Mr. Anderson changed his domicile to Florida many years before he died, thereby exempting the estate from Connecticut resident taxation. But the Court found that Mr. Anderson’s “[p]ersonal, social, and property connections favor neither Connecticut nor Florida because [he] maintained essentially equal connections in each state.”
To differentiate the two potential domiciles and support his Florida domicile argument, the executor pointed to various administrative changes, such as that “Mr. Anderson held a Florida driver's license, was registered to vote in Florida, maintained a local banking account, and declared himself a Florida domiciliary.” But like many wealthy people with multiple residences, however, he was spending time in various, and the Court concluded that from 2006 until his 2015 death he had a “regular practice” of spending 5.5 months in Connecticut each year while spending only 3.5 months in Florida.
The Court compared the above-mentioned “one-time, administrative tasks accomplished with little more than an afternoon’s or a day’s effort, [which] carry little practical significance in or impact on Mr. Anderson’s day to day life” with Mr. Anderson’s daily, “consistent, long term decision to spend more time in Connecticut than in any other state” and concluded that “where Mr. Anderson chose to spend his time is a more persuasive indicator of Mr. Anderson’s intent, and . . . is sufficient to prevent the court from concluding that . . . Mr. Anderson was . . . a Florida domiciliary.” As the Court found that Mr. Daniels failed to meet his burden in establishing that Mr. Anderson changed his domicile to Florida prior to passing away, it upheld the Connecticut Commissioner of Revenue Services’ $13 million assessment against Mr. Anderson’s estate.
Now, we don’t want to overstate our position here. It was not simply Mr. Anderson’s ratio of time between Florida and Connecticut that decided this case. It was “the combination of the amount of time spent in Connecticut, together with the full personal, social, and property connections maintained by Mr. Anderson over that same time period, that the court considers persuasive in determining domicile.” But we shouldn’t understate it either. Indeed, the Court recognized something we see in our day-to-day practice fighting domicile cases, which is that “the most persuasive evidence demonstrating Mr. Anderson's domicile is where he chose to spend his most valuable and limited resource: his time.”
One other quick point on a burden of proof issue. The Court identified applicable legal standards in its opinion, including that the burden to establish a change of domicile is on the individual asserting a change of domicile, and that in an estate tax proceeding the burden of proof is on the plaintiff decedent’s estate claiming nonresidency. But here, the Court found that “[i]n approximately 1980, Mr. Anderson moved to Texas to pursue additional business interests and was domiciled there until approximately 2006.” With that in mind, isn’t there an argument that the burden of proof should have been on the Commissioner? Wasn’t he the party asserting the change in domicile? Given that, perhaps the Court should have placed the burden on the Commissioner to prove that Mr. Anderson changed his domicile back to Connecticut, rather than the estate holding the burden to prove that Mr. Anderson had changed his domicile to Florida.
That could have made a big difference in the final result. Here, it may have been more difficult for the Commissioner to meet his burden to prove that Mr. Anderson abandoned his Florida domicile despite him maintaining a home there, spending lots of time there, and taking a lot of ancillary steps to signal his intent to maintain his domicile there. Indeed, we often find that the burden of proof question can be extremely meaningful in domicile cases, and not something that should ever be overlooked in defending (or deciding) a case.
