Advanced Tax Strategies for High-Net-Worth New Yorkers: Trusts, Residency, and Exit Planning

Key Takeaways

• Learn how to use trusts, residency strategies, and proactive planning to preserve your wealth in New York’s high-tax environment.
• Understand the rules that define New York residency, and why relocation alone won’t protect you from full-year tax exposure.
• Explore best practices to reduce your taxable footprint and protect generational wealth through strategic exits and estate planning.

Tax Planning for High-Net-Worth Individuals in New York

Are you considered a high-net-worth individual (HNWI)? If you have $1 million or more in investable or liquid assets, you’re likely in this bracket. Nice. But without advanced tax planning, you could be exposing a significant portion of your wealth to unnecessary tax liability – especially in New York.

With among the highest income and estate tax rates in the country, New York demands a tailored wealth management approach. With recent legislative changes and intensified audit activity, proactive tax planning has become indispensable. In this blog, we’ll walk through key wealth protection strategies, including:

• Updates to deductions and structuring opportunities introduced by the One Big Beautiful Bill – and how to capitalize on them safely.
• The use of trusts to reduce state tax liability and manage estate exposure.
• Navigating New York’s domicile and statutory residency rules to avoid unexpected tax claims.

Recent Legislative Changes: What’s New & What Matters

One Big Beautiful Bill Act (enacted July 4, 2025) carries two primary implications for New York HNWIs:

The New York Tax Landscape: Why HNW Individuals Need a Plan

To plan effectively, it helps to zoom in on the specific features that make New York’s tax regime so demanding for high-net-worth individuals. 

• One of the highest personal income tax rates: Up to 10.9%
• Estate tax threshold: $7.16 million in 2025, but with a harsh “cliff” rule. This means that going just 5% over the threshold could make you forfeit the entire exemption – not just the excess which could potentially trigger a much larger estate tax bill.
• No state gift tax, but there’s a catch: if you make large gifts within three years of your death, New York may count them back into your estate when calculating estate tax.
• Relocation isn’t enough: Even if you move out of New York, the state may still consider you a resident for tax purposes if your lifestyle shows continued ties. Auditors often dig deep, and may review phone.

Trusts as a Tax Planning Tool

Trusts remain one of the most effective tools if you’re a high-net-worth individuals looking to reduce state tax exposure, protect generational wealth, and manage estate planning efficiently. But not all trusts are created equal – especially under New York’s watchful eye.

Types of Trusts Commonly Used by HNW Individuals

Grantor vs. Non-Grantor Trusts

• Grantor trusts allow you to transfer assets out of your estate while still retaining control and paying income taxes personally. They’re often used to “freeze” asset values and intentionally manage income tax at the individual level. Think: stabilizing future estate tax by locking in asset values today.
• Non-grantor trusts, on the other hand, are treated as separate tax entities. When structured properly (especially in no-tax states) they can be useful in shifting income outside New York’s taxing reach.

Residency and Domicile Planning

New York doesn’t just tax you if you live there – it also taxes those it considers residents. If you’re a high-net-worth individual who spends significant time in the state, it’s crucial to understand the two residency tests New York uses to determine your tax status.

• Statutory Residency: If you spend 184 days or more in New York and maintain a permanent place of abode (PPA) in the state, you can be taxed as a full-year resident – even if your “primary” home is elsewhere.
• Domicile Test: This is more subjective. It focuses on where your true “home base” is based on lifestyle, intent, and personal ties. The state will look at factors like where you keep your most valuable possessions, where your family lives, where you vote, and even where you celebrate holidays.

How to Change Residency the Right Way

Changing residency isn’t just about spending fewer than 184 days in New York. You also need to make a full lifestyle shift. To strengthen a change of domicile, you should:

• Establish a primary residence in your new state and limit use of your New York property.
• Get a driver’s license and register your car in your new state.
• Update voter registration, bank accounts, medical providers, and mailing addresses.
• Keep detailed travel logs and documentation that show a consistent pattern of presence in your new state including moving valuable items to your new home state.

Best Practices and Cautions When Implementing Your Tax Strategy

Avoid costly missteps with the following considerations when applying your tax strategy.

• Don’t assume structure is enough: Whether you’re using non-grantor trusts or ING trusts, substance matters. Make sure the trust has a proper situs, independent trustees, and clearly documented separation from the grantor to withstand New York scrutiny.
• Plan your exit like a business transaction: Moving to Florida isn’t a tax plan. A solid exit strategy should include clear relocation steps and documented lifestyle shifts.
• Avoid partial relocation traps: If you’re keeping a New York residence, be strategic. Track your days carefully, update all key documents, and expect auditors to examine your behavior closely.
• Review your structure annually: Life and law both change. Review your plan regularly to make sure it’s still aligned with current tax rules, family dynamics, and your long-term objectives.
• Work with the right advisors: A coordinated team of lawyers and CPAs can help you optimize your strategy and stay compliant.

Frequently Asked Questions

1. If I move out of New York, will I automatically stop being taxed as a resident?
   No. Simply moving isn’t enough. New York can still consider you a resident if you maintain a permanent place of abode in the state or if your lifestyle shows ongoing ties. You must clearly establish and document a new domicile and break all significant New York connections.
2. Can I use a trust to avoid New York taxes on investment income?
   Yes – potentially. A properly structured non-grantor trust based in a no-tax state can help shift income outside New York’s taxing reach. But if the trust lacks substance or benefits New York residents, the state may still claim taxing rights.
3. What makes the New York estate tax “cliff” so risky?
   Unlike the federal system, New York’s estate tax exemption disappears entirely if your taxable estate exceeds the threshold by just 5%. That means going slightly over the limit could trigger a tax on the entire estate; not just the excess.

At Fusion, our multi-state tax experts can help you navigate every layer. From trust structuring and residency planning to exit strategies and ongoing compliance. Whether you’re building generational wealth or planning a strategic move, we can assist. Contact us today!

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This blog does not provide legal, accounting, tax, or other professional advice. We base articles on current or proposed tax rules at the time of writing and do not update older posts for tax rule changes. We expressly disclaim all liability regarding actions taken or not taken based on the contents of this blog as well as the use or interpretation of this information. Information provided on this website is not all-inclusive and such information should not be relied upon as being all-inclusive.