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The division and distribution of an intestate estate
is often controlled by the intestate laws of just one
state, because most people live and own property in the
same state. Although this is the most frequent
scenario, there are also many people who own property in
multiple states and who have residences in multiple
states.
Two main factors will determine which state's
intestacy laws control the disposition of a person's
intestate estate: 1) The property classification,
or type, of each item that belongs to the estate, and 2)
the state of the person's domicile at the time of death.
Types of Property
There are generally three forms of property: Real
estate, intangible personal property, and tangible
personal property.
Real estate is comprised of the ground, as well as
all property that is permanently attached to the ground,
such as a house. Intangible personal property is
basically cash and items that represent cash, such as
stock certificates. Finally, all property that
does not fall into either of the previous two categories
is generally classified as tangible personal property.
In addition to common objects, such as clothing,
household appliances, and furniture, tangible personal
property will also include larger or more expensive
items, such as all electronic equipment, jewelry,
artwork, and vehicles.
Domicile
A person's domicile is defined as the geographic
location of his or her permanent legal home; the place
which you intend to use as your dwelling for an indefinite or
unlimited period of time, and to which, when absent, you intend
to return. A determination of your domicile is
mainly a matter of your intention as indicated by your
actions.
Although any person may have more than one home or
house, each person can have just one domicile.
According to the IRS, some of the common factors that
can be used to classify a place as a domicile, rather
than a residence are:
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Where you pay state
income tax,
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Where you vote,
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Location of property you
own,
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Length of residence, and
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Business and social ties
to the community.
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In addition to these factors, the IRS also provides
the following statement as guidance in determining a
person's domicile:
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The amount of
time spent in one place does not always explain the difference between
home and domicile. A temporary home or residence may continue for
months or years while a domicile may be established the first moment
you occupy the property. |
Domicile and Property Type Example
Howard owns a house and lives in
Texas, where he works as an airline pilot.
Most of his jobs involve connecting flights in Chicago
and he also spends one or two nights in Miami each month
while he is between evening and morning flights.
The airline maintains an apartment for him in Miami
where he moves some of his personal belongings, such as
clothing, a television, and a gaming system.
Finding that he spends
so much time in
Illinois, Howard opens a checking account with a
local bank that has a branch in the airport, mainly
using it to take money from the ATM. Early in is
career Howard also purchased some vacant land in
Florida as an investment, on the advice of a local
friend.
Sometime later Howard retires, returns to his Texas
home, and begins traveling around the country.
Although he never returns to Illinois, Howard
occasionally visits Florida and uses the apartment
rented by his former employer when it is available.
During this time,
Howard also buys a house in
Hawaii where he begins spending about seven months
out of the year. He continues to return and live
in Texas at all other times. Finally, five years
into his retirement, Howard is vacationing in
California when he becomes ill and is admitted to
the hospital for treatment. Although he is
immediately treated, Howard does not become well enough
to leave and ends up staying at the hospital for
thirteen months before his death.
Determining Domicile
In determining how to distribute Howard's intestate
estate, the first factor is to establish the state he
was domiciled in at the time of his death. Howard
owned property, resided in, or had business ties with
five states: California, Florida, Hawaii, Illinois, and
Texas. Of these five, it is clear that Howard
never intended to reside in Illinois or Florida, which
allows them to be immediately be eliminated as
candidates for his domicile.
Although Howard died in California after living there
for more than one year, it is fairly certain that he did
not intend to live at the hospital for an indefinite
length of time and would have left as soon as he was
discharged. By merely vacationing in California,
it can also be assumed that Howard was not intending to
permanently live there prior to his death. As his
only connection to the state was his vacation and
medical treatment, California's intestate laws will not
control the disposition of any intestate property.
Howard was also
spending about seven months each year at his house in
Hawaii during the five years prior to his death.
Spending this length of time at real estate that he
owned could indicate that he was domiciled in Hawaii,
but the length of time spent at any one place is just
one of many factors that establish a person's domicile.
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Although he was spending more time in Hawaii during
his final years, Howard was also regularly returning to
his house in Texas. Even though he spent more time
in Hawaii, Howard always returned to the state of his
previously established, long-standing residence.
The fact that Howard had maintained his Texas house for
many years before buying a house in Hawaii also makes it
likely that he had been paying state income taxes to
Texas and maintained his voter registration in that
state.
As Howard continued to perform many of the activities
that are commonly associated with a place of permanent
residence in Texas, it will be established as the state
where he was domiciled at the time of death.
Controlling Intestate Laws
As discussed above, Howard's intestate estate will
generally consist of three types of property: tangible
personal property, intangible personal property, and
real estate.
It is important to note that some states do not
distinguish between "tangible" and "intangible" personal
property, but merely combine the two types into the
category of "personal property." As the
controlling laws and ultimate disposition is the same,
with or without this distinction, a notation of these
states will not be useful.
Tangible Personal Property
As he maintained houses in Texas and Hawaii, Howard
will have tangible personal property at each state in
the form of household furnishings, personal possessions,
and automobiles. He also has personal property at
the apartment his former employer rents in Florida.
(Although his Florida property would likely be
forgotten, assume that the gaming system is valuable to
collectors and known to belong to Howard.)
With his domicile established as Texas, the division
and disposition of all Howard's personal property will
be controlled by Texas intestate law even though it is
located in three different states.
Although this choice of laws may not seem to matter
much, suppose Howard is married with two children and
his intestate tangible personal property is valued at
$300,000. Hawaii law would grant his surviving spouse
the first $200,000 of this property. The laws of
the controlling state, Texas, grants his surviving
spouse with one-third of the same property, or $100,000.
In this instance, Howard's surviving spouse receives
$100,000 less of his intestate personal property because
of his domicile.
(See Also:
How are items of personal property divided?)
Intangible Personal Property
Howard is likely to establish and maintain most of
his financial accounts through institutions near to his
Texas home. He may also have accounts with
institutions that are headquartered in other states,
such as brokerage accounts, which were established by
means of telephone calls, paperwork delivered through
the mail, or online methods. All of these accounts
will be controlled by Texas intestate law, without any
regard to the institution's location.
He also has the account that was opened while he was
personally present in Illinois. He only made
deposits and withdrawals while he was in Chicago.
In fact, every transaction with this account took place
while Howard was physically present within the state of
Illinois. Despite these factors, the money in this
account is controlled by Texas intestate laws because it
is intangible personal property subject to the control
of Howard's personal representative.
Real Estate
Howard currently owns real estate in Texas, Hawaii,
and Florida. Unlike the different types of
personal property, real estate is controlled by the
state of it geographic location. The individual
laws of each state will be applied to the real estate
that is located in within each state's borders.
Although Howard's personal representative will most
likely be someone from Texas, he or she will be required
to hire and work with professionals from Texas, Hawaii,
and Florida in order to properly settle his estate.
If the property must be sold, it will be necessary to
engage real estate agents from Texas, Florida, and
Hawaii. It will also be necessary to engage three
separate attorneys, one from each state. The
entire body of intestacy laws that are followed by each
individual American state are different from those of
every other state.
Each state's courts also require specific documents
to record the taxation and transfer of estate property.
Aside from individuals who are personally handling their
own matters, state courts also prohibit anyone other
than a properly licensed attorney from practicing within
its courts. This will require the personal
representative to either personally appear at each state
when legal actions are necessary or to hire an attorney.
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