How to make your pandemic move permanent and lower your tax bill, according to a $17 billion wealth manager

  • Many rich Americans want to make their pandemic moves permanent and lower their tax bills.
  • Clarfeld’s Donna Cuiffo says it takes a lot more than spending more than half a year in a new abode.
  • She told Insider what it takes to change tax domicile and how Clarfeld is expanding to follow clients.

Over the past year and a half, Donna Cuiffo saw lots of her high-net-worth clients flee the Northeast for sunnier climes. Florida and the Carolinas were top destinations while some went west to Colorado or Utah.

Most didn’t intend to relocate permanently but have since decided to keep working remotely or accelerate their retirement plans. Now they want to change their domiciles from high-tax states such as New York and California to tax havens like Texas to save potentially millions in taxes.

It’s up to New York-based Cuiffo, a partner at wealth manager Clarfeld Citizens Wealth Management, to break the news that it isn’t as simple as spending more than half the year in your new abode or changing your driver’s license.

“When clients say, ‘I really like being in Florida,’ I have to say, ‘Well, that’s wonderful. But you have to live in Florida, you have to spend more time there than you’re spending anywhere else,'” said Cuiffo, who leads family office services at the firm, which advises over $17 billion in client assets. The family office segment caters to clients worth at least $10 million.

“People think if they spend six months there, six months here, that’ll be enough. But that first state’s not going to give you up so easily if you really don’t show them at all the facts that support your intention really has been to reestablish yourself.”

New York state has a five-part test to determine a person’s residence for tax purposes, and time spent is just one of them. There is the teddy bear test, which considers where your nearest and dearest are. For instance, if you move without enrolling your children in a new school, that is a red flag. In a famous case, CEO Greg Blatt successfully contested a $430,000 tax bill from New York state, the judge ruling his domicile changed when he brought his dog to Dallas.

It’s worth the headache for high-earners. A joint-filer with a $1 million in income can save 12% ($120,000) by moving from New York City to Florida. Business owners planning to sell their company or go public can also forgo state capital gains tax, which tops 13.3% in California, by moving to Texas.

The move to remote work has gone smoothly, said Cuiffo, so there is no need for her to move with her clients. But Clarfeld is expanding to meet snowbirds where they are, opening a new wealth management office in West Palm Beach in April. Citizens Bank, which acquired Clarfeld in 2019, purchased 80 HSBC branches on the East Coast in May, adding 800,000 retail customers. The majority are in the New York City area, where Citizens did not have a presence, but five are in southeast Florida.

Demand for private wealth services has surged, said Cuiffo, who has been with Clarfeld for more than three decades. The firm has hired 30 employees so far in 2021, bringing its headcount to 185.

The uptick is due in no small part to the prospect of tax hikes from the Biden administration and Democratic Congress. Trying to stay ahead of tax changes with each regime change can feel a bit like a guessing came, Cuiffo said.

“Every administration changes taxes in one way or another. When that roulette wheel goes around, you don’t know exactly where you’re going to be.”

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