What is a 'Domicile'

Your domicile is the place where you maintain a permanent home. Your intent to remain in this place indefinitely makes it your domicile and makes you its domiciliary. Your domiciliary status subjects you to specific laws. Thus, domicile is a legal construct used to determine where you vote, file lawsuits, pay taxes, claim benefits and oblige governmental authority.

BREAKING DOWN 'Domicile'

At birth, your domicile of origin is the home you share with your parents. This location remains your domicile until you reach the age of majority and acquire a domicile of choice. This domicile of choice remains your domicile until you abandon it by relocating to a new domicile with the bona fide intent to make the new domicile your fixed and permanent home. No matter how many homes you own, only one is your domicile. It is the one you acquire intending to remain indefinitely and to which you relocate after you abandon your old domicile. It could be the home where you live, work, bank, vote and register your car.

Residence Versus Domicile

You may have heard residence and domicile used interchangeably to refer to your home. However, the terms ‘residence’ and ‘domicile’ have distinct legal meanings. The defining factor between the two words is the length of time you intend to live there. 

A residence is a home you expect to live in for a temporary period whereas a domicile is a home you plan to live in for an indefinite period. Any place you own property or live for a proscribed period can be your residence. But, only the one site where you intend to make your permanent home and remain indefinitely can be your domicile. Thus, you can have many residences in many places but, you can have only one domicile in one intended place. Your domicile is also your residence, but your residence may or may not be your domicile.

Choosing Your Domicile

If you always have a domicile and you never have more than one, then where is your domicile if you live equally in two homes. Suppose that, after many years of living in Maine and vacationing in Florida, you now live half the year in Maine where you file taxes and make a will, and you live the other half of the year in Florida where you vote and register your car. Is your domicile in Maine or Florida? The even split of your essential activities between Maine and Florida indicates that you did not intend to abandon Maine when you acquired Florida. Consequently, Maine is your residence and domicile, and Florida is your residence but not your domicile.

You cannot change your domicile by merely filing a Declaration of Domicile in another country or state. Instead, your lifestyle must comport with a permanent change of domicile. Your intended domicile can be inferred from the place you live and spend time. Legally your domicile is the location you declare in legal documents, such as the address you use to vote, bank, register vehicles, and pay taxes. Ending a domicile association includes your efforts to close bank accounts, surrendering your driver’s license, removing your name from voting rolls, and pay taxes as a non-resident.

Legal Consequences of Domicile

Your domicile carries legal consequences. It defines which country, state and courts have jurisdiction to probate wills, administer estates, adjudicate lawsuits, and assess state income and death taxes. After a divorce, legal domicile can affect your ability to claim and monitor payment of alimony and child support.

It affects how, when, and on what income you pay state taxes. Residence in a country or state limits the reach of taxing authorities to tax income you earn within its borders. Often upper-income taxpayers will domicile in a state which has the lowest tax liability for them.

The imposition of death taxes is by the domicile country or state. Depending on your stated domicile and that of your beneficiaries, estate tax implications may be dramatically different

But, domicile can extend its reach to all of your income from any source worldwide. However, indicia of residence, like owning real property or indicia of domicile, like failing to abandon your old domicile properly, can subject you to taxes in more than one state. 

RELATED TERMS
  1. Offshore Mutual Fund

    An offshore mutual fund is a mutual fund that is based in an ...
  2. Translation Risk

    Translation risk is the exchange rate risk associated with companies ...
  3. Corporate Inversion

    A corporate inversion is a process of moving and reincorporating ...
  4. Principal Residence

    The main home that a person inhabits and uses for the majority ...
  5. Nursing Home Resident Trust Fund

    A nursing home resident trust fund helps residents manage finances ...
  6. Matador Bond

    A term used to identify a foreign bond issued in Spain by a company ...
Related Articles
  1. Retirement

    Estate Planning Tips for Multinational Families

    Estate planning is even more essential and complex for multinational families.
  2. Taxes

    The Tax Implications of Moving During Retirement

    What are the tax implications of moving during retirement? They could likely affect your cost of living.
  3. Personal Finance

    New Grads: 4 Reasons to Not Leave the Nest

    For new graduates, living with parents may be the best way to get a sound financial footing.
  4. Personal Finance

    7 Smart Steps Every New Homeowner Should Take

    Don't let the excitement of owning your own home lead you to make bad financial decisions.
  5. Personal Finance

    Tax Issues Transitioning Service Members Should Know

    Transitioning military personnel and their families face significant impacts to their tax situation. Here are nine things to consider.
  6. Taxes

    How Getting A Raise Affects Your Taxes

    Many people think they may actually make less overall because they are paying more taxes.
  7. Personal Finance

    Managing Your Employer Stock Holdings

    Investors should not be complacent when it comes to holdings in an employer's stock.
  8. Retirement

    5 Estate Planning Tips

    These tips can help you reduce taxes on your estate and ensure that your last wishes are closely met.
  9. Managing Wealth

    Assets That Increase Your Net Worth

    Your home, properties and vehicles can all increase your net worth.
  10. Taxes

    Top Tax Advantages of Buying a Home

    If you're a homeowner, don't forget these deductions and credits, which you can use to reduce your tax bill.
Hot Definitions
  1. Financial Risk

    Financial risk is the possibility that shareholders will lose money when investing in a company if its cash flow fails to ...
  2. Enterprise Value (EV)

    Enterprise Value (EV) is a measure of a company's total value, often used as a more comprehensive alternative to equity market ...
  3. Relative Strength Index - RSI

    Relative Strength Indicator (RSI) is a technical momentum indicator that compares the magnitude of recent gains to recent ...
  4. Dividend

    A dividend is a distribution of a portion of a company's earnings, decided by the board of directors, to a class of its shareholders.
  5. Inventory Turnover

    Inventory turnover is a ratio showing how many times a company has sold and replaces inventory over a period.
  6. Watchlist

    A watchlist is list of securities being monitored for potential trading or investing opportunities.
Trading Center