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:
Where you pay state income tax, Where you vote, Location of property you own, Length of residence, and Business and social ties to the community.
In addition to these factors, the IRS also provides the following statement as guidance in determining a person’s domicile:
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.
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.
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.