Golf champion Mickelson, who lives in California, said last month that he would make some “drastic changes” because of higher taxes.
“I happen to be in that zone that has been targeted federally and by the state,” Mickelson said. “It doesn’t work for me right now, so I’m going to have to make some changes.”
While it’s not a frenzy, top earners are making moves and being more proactive, said Teresa Ridge, senior director of planning in California at Wells Fargo & Co.’s unit that caters to those with at least $1 million invested with the bank.
“These are people with the means and resources” to act, she said.
Ridge said one Wells Fargo Private Bank client, who lives in California, bought a home in Nevada, which has no state income tax, just after the election. The San Francisco-based firm also is helping a chief executive officer in his mid-40s, who resides in California, buy a second home in Nevada, where he plans to be a resident by the time he sells his business within five years, she said.
Significant Savings
The savings could be significant, Ridge said. A millionaire with $100 million in gains from the sale of a business might save as much as $13.3 million in state income taxes if the firm and family resided in Nevada compared with California based on current rates, she said.
“Nevada seems to pop up quite a bit, especially because housing prices are very attractive and inventory bountiful,” Ridge said.
Texas is drawing top earners as well, said Montgomery of Canterbury Consulting, which advises families with an average of $75 million in net worth. One client who lived in California moved to the no-income-tax state at the end of 2012 for tax purposes, he said.
Other California families with businesses held in trusts have moved them to South Dakota to take advantage of that state’s favorable tax and trust laws including rules allowing the entities to last for multiple generations, Ridge said. Restructuring such accounts is complex and people must make sure they don’t violate state or federal tax rules when doing so, she said.