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Jan 18, 2017 - owns business interests in another state. ... least amount of federal gift and estate taxes. ... taxes to avoid the forced sale of business interests. ... You may contact him at 561.689.1000, e-mail him at [email protected]
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OUT OF STATE BUSINESS INTERESTS AND DUAL RESIDENCY Take Necessary Precautions to Establish Florida Domicile By: Richard S. Bernstein, CEO & Abraham M. Mora © All Rights Reserved

Establishing a Florida domicile brings many tax benefits. There is no Florida state income tax and no state inheritance tax. A Florida residence can qualify for a homestead exemption from real estate taxes. But there are special considerations in establishing a Florida domicile when a taxpayer owns business interests in another state. These considerations are illustrated in the 2016 Richard S. Bernstein New York Tax Appeals Tribunal case of Petition of Campaniello. In that case, the taxpayer had tried to move his domicile from New York to Florida. The taxpayer had established extensive Florida connections. The taxpayer had a Florida residence, voted in Florida, had a Florida driver’s license, and established Florida businesses in addition to his New York businesses. In addition, the taxpayer spent less than 6 months per year in New York. In spite of all these factors, the New York Tribunal found that a Florida domicile had not been established. The Tribunal focused in on the business interests, and noted that the taxpayer kept the books and records for the New York and Florida businesses in New York. The Tribunal also found that the taxpayer continued at times to manage the New York and Florida businesses from New York. These factors were considered important by the Tribunal in finding that a New York domicile had been maintained. Congress recently closed this loophole by a law which became effective July 31, 2015. But this law only applies to property received from an estate where the estate tax return was filed after July 31, 2015. There are important lessons to be learned from this case. For taxpayers establishing a Florida domicile while owning a business in another state, certain precautions should be considered. First, a taxpayer should consider transferring formal legal authority to make business decisions to other family members or employees to the extent the taxpayer lacks legal authority to manage the business. This would likely eliminate an important rationale to a Tribunal finding domicile had not changed. If this change is not possible, a taxpayer should keep books and records for the business in Florida and make as many business decisions from Florida as possible. Finally, if the taxpayer is an employee of the business, the taxpayer should consider changing his status from an employee to a consultant. It is easier for a consultant to perform services for a business without being physically present at the business. If President Trump changes the Federal estate tax law, then many states might enact their own estate tax. Proper estate planning for a business often involves the transfer of ownership of the business to family members with the least amount of federal gift and estate taxes. Life insurance is often helpful in equalizing family members when only some family members receive the business interests. Life insurance can also provide liquidity to pay estate taxes to avoid the forced sale of business interests. Questions or concerns? Call us for a confidential consultation with our expert advisors who can guide you through this complex area of estate planning at 561.689.1000.

Abraham M. Mora

Abraham M. Mora is a partner with Kaye Scholer LLP and head of the firm’s West Palm Beach Office. He has extensive experience involving complex estate planning, including change of domicile, generation-skipping trusts, personal residence trusts, family limited partnerships and private foundations.

Richard S. Bernstein, CEO of Richard S. Bernstein & Associates, Inc., West Palm Beach, is an insurance advisor for high net worth business leaders, families, businesses, municipalities and charitable organizations. An insurance advisor to many of America’s wealthiest families, he is a writer, trusted local and national media resource and expert speaker on estate planning and health insurance. You may