Gavin Howe
It is possible to live in two places at the same time, and there is no law against owning or renting multiple properties. However, there are legal and financial considerations to take into account. For example, while you can be on the electoral register for both addresses, you can only vote at one address on election day. Similarly, for official correspondence, you can only provide one address, which is usually your primary residence. In addition, tax laws vary between states, and each state has its own requirements for proving residency. As such, it is advisable to consult an estate planning attorney to navigate the legal and financial implications of maintaining two residences.
| Characteristics | Values |
|---|---|
| Legal residence | An individual can only have one legal residence/domicile |
| Determining factors | Where you spend most of your time, where your driver's license is from, where you are registered to vote, where your mail is received, where your credit card bills go, where your doctors are, where your business address is |
| Tax implications | Property taxes are paid according to the jurisdiction of the property; state income taxes are paid in the state where you work; tax benefits vary by state |
| Estate planning | An individual may need to go through the probate process in multiple states; a trust can be created to own real estate and make the transfer of property easier |
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What You'll Learn
Residency requirements
Residency rules vary from state to state, and what is allowed in one place may not be allowed in another. While it is possible to have residency in two states, there are certain conditions attached to it.
Residency refers to the place you consider your primary home and where you have strong personal and financial ties. It is the place where you typically live, work, and contribute to the community, not just a place you visit occasionally.
Each state has its own set of residency requirements and regulations. Some states might be more open to the idea of dual residency, while others might have stricter rules in place. Many states require you to spend a certain number of days within their borders to establish residency, which can vary from a few weeks to several months. For example, most states define a resident as an individual who is in the state for more than 183 days in a year. However, there are variations in how states count these days, with some states counting only full 24-hour days, while others include partial days.
Factors that can influence your residency status include where you're registered to vote, where you hold a driver's license, where you maintain bank accounts, and where you own property or pay taxes. Additionally, you must be physically in the same state as your domicile for most of the year and be able to prove that it is your principal residence or "true home." This proof typically includes more than just a mailing address or driver's license, and tax authorities may investigate other factors such as where you earn income, where your children attend school, and where you belong to clubs or religious institutions.
Having residency in two states can offer certain perks, such as better healthcare options or insurance rates, and smoother property-related transactions. However, it also comes with challenges, including conflicting laws between states, administrative burdens, and potential double taxation.
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Estate planning
If you own property in different states, your heirs will likely need to go through the probate process in multiple states. This can be complicated, time-consuming, and expensive. To avoid probate, you can ensure the deed says the property is owned jointly with your spouse, with a right of survivorship. Alternatively, you can create a trust and have the trust own the real estate.
If you live in multiple states, it is important to understand the unique challenges and considerations of estate planning in each state. For example, some states have different provisions about when your living will shall take effect. To avoid common mistakes, it is important to work with an attorney familiar with the laws of both states and to keep your estate planning documents up to date.
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Tax considerations
Domicile and Statutory Residency:
Most states use the concepts of "domicile" and "Statutory residency" to determine tax residency. Your domicile is your permanent home, defined as the place you intend to return to after temporary absences. On the other hand, statutory residency typically refers to spending a certain amount of time in a state during a given year, often 183 days, though this can vary. It's important to understand that while you may have multiple residences, you can only have one domicile for tax purposes.
State Tax Residency and Double Taxation:
Qualifying as a tax resident in multiple states can lead to double taxation, where both states claim the right to tax your income for the same tax year. To avoid this, it's crucial to understand the specific state tax residency rules and establish your domicile promptly after moving. Keep in mind that some states have reciprocal agreements, which means you'll only pay taxes in your state of residence, even if you work in a different state.
Filing Multiple State Tax Returns:
If you live and work in two different states, you may need to file multiple state tax returns. Each state will have its own reporting requirements and apportionment percentages for income and deductions. It's important to carefully review the tax laws of each state to ensure compliance.
Remote Work and "Convenience Rules":
With the rise of remote work, tax considerations have become more complex. Some states have "convenience rules", where they tax employees as if they work in the employer's state, even if the employee works remotely from another state. This can result in unique tax challenges for remote workers, and it's important to understand how these rules apply in different states.
Primary Residence Determination:
If you have residences in two different states, the determination of your primary residence for tax purposes is based on facts and circumstances. Generally, whichever location you live in for more than half the year is considered your primary residence. This has implications for which state's tax laws will apply to your income and deductions.
Living in two places can present complex tax considerations, and it's always recommended to seek professional tax advice to ensure compliance with the relevant state tax laws and to optimize your tax obligations.
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Domicile determination
Domicile is a legal concept that refers to a person's fixed, permanent, and principal home. It is one of the connecting factors used in common law legal systems, and a person acquires a domicile at birth. Generally, domicile can be divided into three types: domicile of origin, domicile of choice, and domicile by operation of law (also known as domicile of dependency).
Domicile of origin is established by the law at birth and refers to the domicile of the person's parent. This type of domicile is hard to lose, and even if a person leaves their country of origin with no intention of returning, they will still be domiciled there until they obtain a new domicile of choice. An example of this is the case of Udny v Udny, where an individual's domicile of origin was determined to be Scotland, despite being born and living in Tuscany and their father living in England. The court made this decision based on the father's domicile of origin being Scotland.
Domicile of choice, on the other hand, is acquired when a person has the ability to settle permanently in another place. This ability has been interpreted as having permanent resident status for immigration purposes.
The third type, domicile by operation of law, or domicile of dependency, refers to situations where a person is legally dependent on another, such as a child whose domicile is determined by their parents. In Canada, for example, the domicile of a child generally depends on and changes with the domicile of the parent(s) they habitually reside with.
When determining an individual's domicile, courts apply their own law and understanding of the concept. In some common-law countries like Australia, New Zealand, and certain provinces in Canada, the concept of domicile has been subject to statutory reform. For instance, in Canada, the Divorce Act now states that a provincial court has jurisdiction over a divorce proceeding if either spouse has been habitually resident in that province for at least a year, regardless of their domicile.
While an individual may own property and pay taxes in multiple states or countries, they can only have one domicile at a time. This has implications for various legal matters, including estate planning, taxes, and the interpretation of a person's will upon their death.
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Tactical decisions
Deciding where you live is not just a legal issue, there are tactical decisions to be made as well. The first tactical decision is to choose which of your residences is your "home". This is referred to as "domicile" in legal terms. This has far-reaching consequences and can be determined by asking yourself questions such as: "Where is my driver's license from?", "Where am I registered to vote?", "Where do I spend most of my time?", "Where do I receive my mail?", "Where do my credit card bills go?", and "Where are my doctors?".
The answers to these questions will help determine your domicile, which will then determine the laws that affect your taxes, the operation of your business if you are self-employed, where your will is to be probated, inheritance laws and regulations regarding your estate, and what benefits, if any, you are entitled to.
If you own property in more than one state, it is advisable to execute a Durable Power of Attorney in each state. This ensures that if you need to have legal or financial decisions made by someone else, you will have the proper documents in hand. This is especially important if you have bank accounts and property in each state that are not owned by trust.
Other tactical decisions include considering whether you need two sets of clothing, one for each location, and whether you can travel with pets.
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Frequently asked questions
Yes, it is legal to live in two places at the same time. There is no law against owning or renting two or more properties. However, there are some considerations to keep in mind, such as paying council tax for each place and choosing one address as your permanent residence for official correspondence and voting.
If you live in two different states, you may be considered a resident of both states for tax purposes. Each state has its own rules and requirements for residency, and you may need to pay taxes in both states. It is recommended to consult an estate planning attorney to determine your residency status and understand the tax laws in each state.
In addition to tax implications, there may be other legal and financial considerations. It is advisable to execute a Durable Power of Attorney in each state to facilitate decision-making if needed. You may also need to consider the impact on car insurance, healthcare, and other services where your address may be relevant.
