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Horizon Elder Law & Estate Planning Blog

Friday, March 26, 2021

What Does ‘Domicile’ Mean in California?

The advantages of remote work and increased wealth have offered many Californians the opportunity to maintain multiple residences across different states.

While this may seem like an enviable luxury, it carries with it the complications of distinguishing between one’s residences and one’s domicile. Why is this important? And what does domicile mean in California?

Many individuals attempt to escape high California taxation by establishing permanent residency in a different, low-tax state. Unfortunately, as California estate planning attorneys advise, taxation follows one’s permanent residence, or one’s domicile, and is governed by a complex set of guidelines.

Understanding the difference between residence and domicile is critical when growing and protecting your wealth and preserving your estate for your heirs.

What is the Difference Between Residence and Domicile?

When considering taxation and estate planning, it's essential to understand how California defines residence vs. domicile. For California tax purposes, a clear distinction is made between a place of abode and a true, fixed permanent home.

According to the California Revenue and Tax Code, a residence is a place of some permanency, while a domicile is a true, fixed permanent home to which an individual intends to return after an absence. Individuals may own more than one residence but may only be domiciled in one state at any time. A new domicile may not be established until the former domicile is relinquished.

What Are the Defining Characteristics of a Domicile in California?

The Franchise Tax Board (FTB) presents a strict set of guidelines for determining resident status and defining one’s domicile in California.

While factual verification of domicile is extensive, here are the basic concepts outlined by the FTB regarding a domicile for California tax purposes:

  1. A domicile is a place where you voluntarily establish yourself and your family.
  2. There is the intention of making your California residence a valid, fixed, permanent home and principal establishment.
  3. Your California residence is the palace you intend to return to whenever you are absent.
  4. The California home is maintained as a marital residence.

To establish a change of domicile from California, the FTB demands that an individual’s new residence be set up with the full intent to remain permanently in that location, abandoning the former domicile and physically moving and residing in the new locality.

Proving a Domicile Outside of California

If you have moved from California but still own a residence in the state, you must be able to satisfy two tests to establish a domicile change.

The Identifiable Purpose Test: This test identifies an individual's purpose for being in California and considers the individual’s length of stay in and out of California.

Close Connections Test: This test focuses on a person’s connections to their new place of residence. Items brought under examination include but are not limited to:

  • Where a person's spouse and children reside
  • Where a person’s children attend school
  • Where a person’s real property is located
  • Where a person's federal and state tax returns are filed
  • Where a person's banking and government affairs are conducted
  • Where a person registers their vehicle
  • Where a person maintains a driver’s license

California closely analyzes these factors in conjunction with other more invasive criteria, such as where gym and club memberships are held, where telephone calls originate, a person’s travel habits, and itineraries.

Will My California Domicile Impact My Heirs?

While taxation is a prime concern for many domiciled in California, there is some relief with regards to taxation and the final settlement of your estate after your death.

California is one of 38 states that does not impose an estate tax. It is also among the majority of states that do not levy an inheritance tax or gift tax on recipients.

Domicile will impact your heirs, however, if your estate is relegated to the probate process. Probate proceedings are held in the site and county where you were domiciled at your death.

Seeking Advice From a California Estate Planning Attorney

As you grow your wealth in California, it's wise to fully consider your long-range financial goals in the context of California residency and tax laws.

Understanding how California distinguishes residences from domiciles is critical to avoiding missteps that might result in significant taxation and penalties.

Talk to a California estate planning attorney today about how being domiciled in California may affect your wealth-building objectives and legacy goals.

Contact our office for options about managing your estate under California residency guidelines.


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