As many of us finalize our state and federal tax filings, it's worth asking: could you be keeping significantly more of your wealth simply by changing your legal residence?
For high-net-worth individuals, Florida offers far more than sunshine and coastal beauty—it’s a smart financial strategy.
Establishing Florida residency doesn’t just eliminate state income tax; it unlocks a host of other advantages, from capital gains exclusions to asset protection. If you're beginning to think about tax planning for the year ahead, consider this...
Planning: Why High-Net-Worth Individuals Should Establish Florida Residency Before a Liquidity Event
If you’re a high-net-worth individual anticipating a major liquidity event—whether from the sale of a business, stock vesting, an inheritance, or another financial windfall—where you claim residency at the time of the event can make a multimillion-dollar difference.
Waiting until after the event to consider relocating could cost you millions in unnecessary taxes. Residency in a low-tax state like Florida will allow you to legally minimize state income taxes, protect more of your wealth, and take advantage of asset protection laws. The key is to establish Florida residency well in advance—ensuring you are fully set up before your liquidity event occurs.
What is a Liquidity Event? (And When to Start Planning)
A liquidity event is any financial occurrence that results in a sudden influx of accessible wealth, such as:
- Business Exit or IPO: Selling a company, a merger, or a public offering.
- Stock Vesting & Executive Compensation: Large bonuses, exercised stock options, or deferred compensation payouts.
- Inheritance & Estate Settlements: Receiving significant assets through a family wealth transfer.
- Divorce Settlements & Legal Awards: High-value divorce settlements or legal claim payouts.
- Real Estate or Investment Sales: Selling a primary or secondary home, investment properties, or high-value assets.
These events often trigger significant tax liabilities. If you reside in a high-tax state such as California, New York, Massachusetts, Connecticut, or Illinois at the time of your liquidity event, state tax authorities will claim a substantial portion of your newfound wealth. Florida’s tax laws, however, could allow you to retain significantly more—but only if you establish residency in advance.
Why Florida? The Financial & Tax Advantages
1. No State Income Tax
Executive bonuses, deferred compensation, and retirement distributions remain untouched by state-level taxes. Compare that to what you’d pay in some of the highest-taxed states:
- California: Up to 13.3%
- New York: Up to 10.9%
- Massachusetts: 9% for long-term capital gains over $1M (effective 2024)
- Connecticut: Up to 6.99%
- Illinois: 4.95% flat tax
2. No Capital Gains Tax
Capital gains from the sale of a business, stock liquidation, or real estate sales are not subject to state taxation in Florida.
3. No Estate or Inheritance Tax
Inherited wealth is not taxed at the state level. Some states, like New York and Connecticut, impose estate taxes with rates reaching up to 16%. By establishing Florida residency in advance, you can shield generational wealth from unnecessary taxation.
4. Florida’s Homestead Protection
Establishing a primary residence in Florida grants access to some of the strongest homestead protections in the country:
- No forced sale of your primary home due to creditor claims (except IRS or mortgage defaults).
- Significant property tax savings through the Homestead Exemption and the Save Our Homes cap.
- Legacy preservation—homes can be passed to heirs with reduced property tax impact.
5. Business & Investment-Friendly Environment
For entrepreneurs reinvesting their liquidity event proceeds, Florida offers:
- No state income tax on LLCs and S-Corps.
- Lower corporate tax rates than New York and Connecticut.
- A growing financial, real estate, and technology sector with fewer regulations.
Real Tax Savings: $10M Liquidity Event Example
Let’s assume you’re selling a business, triggering a $10 million capital gain. Here’s a comparison of your tax liability in Florida vs. New York:
By establishing Florida residency before your liquidity event, you could save over $1 million in state income tax alone on a $10M gain.
Timing is Everything: How to Establish Florida Residency
To benefit from Florida’s tax laws, you must prove residency well before your liquidity event occurs. Simply owning a home in Florida isn’t enough—high-tax states often challenge residency claims, particularly for high-net-worth individuals.
To strengthen your claim as a Florida resident:
- Spend at least 183 days (over half the year) in Florida. Maintain records to prove your physical presence.
- Purchase a primary residence. File for the Florida Homestead Exemption as soon as possible.
- Declare Florida as your legal domicile. Update legal documents to reflect Florida as your primary home.
- Obtain a Florida driver’s license. Do this early to solidify your residency claim.
- Register to vote in Florida. Strong evidence of residency status.
- Update financial and legal documents. Ensure banks, credit cards, tax filings, and estate documents reflect your Florida address.
- Move professional relationships to Florida. Work with Florida-based attorneys, CPAs, and financial advisors.
- Sever key ties to your former state. Maintaining a significant residence, club memberships, or business activities in your former state could trigger tax residency audits.
High-tax states aggressively audit residency claims. Waiting too long to move could result in your former state attempting to claim part of your liquidity event.
Final Takeaway: Don’t Wait, Plan Early for Maximum Savings
Many individuals assume they can move after their liquidity event—but by then, the tax burden is locked in. Aim for 12+ months in advance to ensure a seamless transition and airtight tax positioning.
- Establish Florida residency at least one year before your liquidity event.
- Sever key ties to your former state.
- Ensure all financial, legal, and personal affiliations reflect your new residency.
- Time your move to align with family and work considerations.
California, New York, Connecticut, Massachusetts, and Illinois have aggressive tax enforcement—don’t give them a reason to audit your move.
Considering a Move? Let’s Strategize Together.
Florida isn’t just tax-friendly—it’s home to some of the most prestigious real estate in the country, from Palm Beach’s oceanfront estates to Jupiter’s exclusive golf communities. If you’re considering establishing Florida residency, finding the right property is a critical part of the process.
With years of experience helping high-net-worth individuals transition to Florida, I can help you:
- Find the perfect luxury residence to establish Florida domicile.
- Navigate the Homestead Exemption process for maximum tax benefits.
- Align your move with your financial advisors to optimize tax efficiency.
If a liquidity event is on your horizon, now is the time to start planning. Let’s discuss how to strategically position your move so you can maximize wealth preservation and lifestyle benefits.
📩 Contact me today to explore Florida’s premier real estate opportunities and create a seamless transition to your new tax-friendly home.
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