For the Wealthy, Relocation Must Be More Than a Tax Decision

Several wealth tax plans across the US—such as the California Billionaire Tax Act—are shaping how high-net-worth individuals and families plan, move, and structure their wealth. From domicile decisions to cross-border considerations, policy signals are prompting earlier and more complex conversations across advisory teams.

Navigating Policy Pressures

Advisers should avoid overreacting to proposals that may change materially or fail to pass altogether and instead use them as a planning catalyst against uncertainty.

This is essential because clients are asking more sophisticated questions about liquidity, structure, and long-term flexibility, which require proactive engagement. Conversations are shifting toward protecting legacy and evaluating whether it makes sense to transfer wealth during life rather than after death.

There also is a growing focus on how wealth is structured. Many high-net-worth families don’t hold their wealth in cash, but rather in operating businesses or other illiquid assets. When contemplating a tax based on total asset value, the question becomes how that liability would be funded in practice.

That answer isn’t always straightforward. Advisers need to be prepared to walk through the issue with clients as it affects decisions around structure and diversification. In an environment of uncertainty, policy signals will continue to prompt earlier and more proactive planning conversations.

Domicile Decisions

One of the most visible responses to evolving tax policy is greater interest in changing domicile, an approach that carries a heightened risk of missteps.

Relocating isn’t just a tax decision; it’s a life decision. It involves weighing family, community, and lifestyle choices alongside tax considerations. The key challenge for advisers is to ensure that any change in domicile is real, defensible, and thoroughly documented by evaluating all the potential implications.

Some states are becoming more aggressive in scrutinizing residency claims, particularly for individuals with multi-state lifestyles.

For example, New York’s Department of Taxation and Finance and California’s Franchise Tax Board apply relatively expansive definitions of what constitutes a domicile compared with some neighboring states. A change in domicile is evaluated based on multiple factors, including days spent in the state, property ownership, social ties, club memberships, and even the location of the family pet.

In practice, simply living there for 183 days—the common threshold for statutory residence in many US states—or acquiring a residence in another jurisdiction is often insufficient for the prior state of residence to relinquish taxing authority.

A successful change requires more than purchasing property elsewhere. It involves demonstrating a clear shift in the center of one’s life, such as by updating driver’s licenses, voter registration, health-care providers, and financial relationships. Missing even small steps can create vulnerabilities in an audit.

Timing is equally critical. Some state proposals have included retroactive effective dates, meaning that even if legislation is finalized later in a year, the determination of residency could reach back to the beginning of that tax year.

For instance, if enacted following a potential November 2026 vote, California’s Billionaire Tax Act would apply to California residents as of Jan. 1, 2026, even if they established out-of-state residency later in the year, before the bill even came up for vote. In that environment, an individual who hasn’t clearly and comprehensively established a new domicile early on risks being treated as a resident of their former state.

Another common pitfall is a lack of alignment within families. A partial move—in which one spouse relocates but the rest of the family remains—rarely achieves the intended outcome and can invite scrutiny. States usually look at the totality of circumstances, and inconsistent facts can undermine a whole strategy.

Domicile planning entails substantiating a genuine change in lifestyle. That requires coordination across advisers, careful documentation, and a clear understanding of how residency will be evaluated under evolving rules.

International Relocation

While domestic relocation is on the rise, international moves are less common among high-net-worth families in response to tax policy alone.

However, international relocation is more common among high-net-worth individuals and often is driven by personal considerations, such as US health-care expenses.

The fundamental constraint for US citizens is straightforward: The US taxes its citizens on worldwide income, regardless of where they reside. Moving abroad doesn’t eliminate US tax obligations and, in many cases, it introduces additional complexities.

Those who consider international relocation often are motivated by lifestyle or personal factors rather than purely tax considerations. Even then, the tax implications require careful modeling and coordination with specialized advisers.

The most significant consideration is the potential for US exit tax exposure if a client chooses to renounce citizenship. For a high-net-worth individual, this can be substantial—effectively treating them as if they had sold their global assets and subjecting them to tax on unrealized gains, above certain thresholds.

Making Plans

As tax policy discussions continue to evolve, advisers’ focus should remain on building plans that can hold up under change. That means prioritizing flexibility and coordination across advisory teams.

Preparation and discipline will define the strength of any long-term strategy in an environment where rules aren’t yet settled.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law, Bloomberg Tax, and Bloomberg Government, or its owners.

Author Information

Karin Christenson is a senior wealth planner at Wilmington Trust, based in California.

Lisa Ligas is national director of wealth strategies at Wilmington Trust.

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