A Legal Question

As our regular readers undoubtedly noticed, blogging has been relatively light recently. There are a couple reasons for that. One of the reasons is that I am studying for the Bar Exam, and that makes me, honestly, pretty much incapable of talking about anything else. I don't really want to turn the blog into a whiny, rambling tirade about the Bar. But as I study, I occasionally start thinking through hypotheticals and legal oddities. As I study, I thought I would write what I consider to be interesting fact patterns and their results.

Topic: Conflicts of Law

Legal Background: Domicile is essentially where a person lives (it is where the person intends to stay indefinitely). A person can only have one domicile. Where a person is domiciled is generally where they owe local taxes (but the issue here is domicile, not taxes).

Fact Pattern: Joe has always lived in Scranton, Pennsylvania, but he has always dreamed of retiring in the Big Apple. After making a fortune in Scranton selling paper, he decides to fulfill his dream and move to NYC. Before the move, Joe is visiting with his lawyer, Larry. Larry says, "Hold on now. With your particular portfolio, estate taxes are much better for you in Pennsylvania than New York.** I'm a brilliant lawyer, so I have a plan for you. Go ahead and move to New York, but don't change your legal residence. Make sure everyone knows that your domicile is Pennsylvania. That way your family won't need to pay New York estate taxes when you die." Joe loves the idea of avoiding taxes, so he follows Larry's advice. He buys his dream condo in New York and resides there most of the time, but Joe keeps his address in Scranton. To ensure that everyone knows that he has no intention of changing his domicile, Joe mentions to people he meets at parties, "Hey, don't forget, my domicile is Scranton, and I intend to keep it there until I die." In reality, once he moves, Joe never again enters the state of Pennsylvania. Joe dies in New York. Which state can collect estate taxes from Joe's estate?

A. Lawyer Larry thought up a perfect scheme - no state can collect taxes.

B. Only New York can collect estate taxes because Joe's actions demonstrate that he indeed intended to move his domicile to New York.

C. Only Pennsylvania can collect estate taxes because Joe was careful to leave evidence that he intended PA to be his domicile.

D. Both New York and Pennsylvania can collect estate taxes from him. His estate will pay taxes twice, and without any set-off or credit from paying taxes to the other state.

Answer: Lawyer Larry had better call his malpractice insurance carrier and warn them of an imminent claim because D is the correct answer.

Reasoning: New York will successfully argue that Joe's only domicile is NY because his "actions speak louder than words" - by moving to NY and spending all his time there, his actions show his intent was to make NY his domicile. PA will successfully argue that PA is his only domicile because he demonstrated the intent to keep their state as his home for the indefinite future by keeping his address and telling everyone it is his domicile. Thus, both states will successfully argue that Joe only has one domicile - in their state.

* In reality, it is doubtful that estate taxes would be lower in PA than NY.

LEGAL DISCLAIMER: THIS IS NOT LEGAL ADVICE; YOU ARE NOT A CLIENT; I AM NOT YOUR LAWYER. THIS IS MERELY RAMBLING ON A BLOG. IF YOU WANT LEGAL ADVICE, GO TALK TO AN ATTORNEY.