Under Connecticut law, a decedent’s estate is subject to estate tax if the individual was living in Connecticut at the time of their death. “Living” (or “Domiciled” as the legal term) is often defined as (i) actual residence within a particular state, combined with (ii) the intention to make that state your permanent home. Because where you live is a question of intent, courts frequently examine a person’s overall lifestyle to determine their true residence, particularly in cases involving a claimed change in where they live.
Establishing Residence in Connecticut
In Connecticut, determining whether a change in where you live has occurred requires “clear and convincing” evidence. The person claiming a change in where the decedent lived must provide evidence strong enough to meet this high legal standard. Connecticut regulations identify 28 nonexclusive factors that courts use to evaluate whether an individual has changed their residence. These factors can include property ownership, voting registration, and where the individual spends their time.
Because states define “where you live” differently, multiple states may independently claim someone’s residence, creating a risk of double estate taxation. A famous example involved the heir to the Campbell Soup fortune, where both New Jersey and Pennsylvania deemed the individual a resident of their states and collected $17 million each in state inheritance taxes.
Key Case: Daniels v. Commissioner (2024)
A recent case, Daniels v. Commissioner, highlights the complexities of determining where someone lived. In this Connecticut Superior Court case, decided on October 15, 2024, the Court considered whether a taxpayer—who split his time between Connecticut (5.5 months), Florida (3.5 months), and Arizona (3 months) annually over nearly a decade—was living in Connecticut at his death. The estate faced a $13 million Connecticut estate tax assessment.
Relevant Facts:
- The decedent owned homes in both Florida and Connecticut of significant value.
- He maintained social ties, country club memberships, and vehicles in both states.
- The decedent held a Florida driver’s license, registered to vote in Florida, and maintained local Florida banking accounts.
- He declared himself a Florida resident.
The Court found that these administrative actions did not outweigh the fact that the decedent spent more time in Connecticut than in any other state. It concluded that the decedent’s consistent and long-term decision to allocate his most valuable resource—time—to Connecticut was the most persuasive evidence of where he lived. The $13 million estate tax assessment was upheld because the executor failed to prove a change in residence by clear and convincing evidence.
Avoiding Pitfalls When Changing Where You Live
If you wish to change your residence to another state while keeping a home in your original state, it is vital to take comprehensive steps that demonstrate your intent to leave your former residence behind. In addition to administrative tasks like obtaining a new driver’s license and registering to vote, other recommended actions include:
- Updating Your Estate Plan: Create new wills and trusts to reflect your new residence.
- Federal Tax Returns: Use the address of your new residence as your home address.
- Business Operations: Conduct your business or profession in the new state.
- Physical Presence: Spend as much time as possible in the new state.
- Consistent Actions: Pursue behaviors and activities that clearly indicate your intention to make the new state your permanent home.
- The Danger of Double TaxationThe Daniels case underscores the challenges of proving a change in where you live and the risks of double taxation. To minimize these risks, proactive and consistent actions are essential.
If you are considering relocating to another state or have questions about estate taxes, reach out to the team at Lindberg & Ripple and we can provide the financial guidance you may need.
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