Billionaire Wealth Tax: How the Ultra-Rich Plan Ahead
A wave of state-level wealth tax proposals is reshaping the financial planning landscape for America’s ultra-wealthy. Washington State enacted a 9.9% tax on household income over $1 million, and California is considering a one-time 5% levy on the net worth of residents with over $1 billion in assets. High-profile names like Travis Kalanick, Sergey Brin, and Larry Page have reportedly already begun repositioning their residency and business entities in response. At SW Accounting & Consulting Corp, our clients are asking a single pressing question: what can legally be done? Here is a comprehensive look at billionaire wealth tax planning and the strategies the ultra-wealthy are deploying right now.
What State Wealth Taxes Are Emerging in 2026 and Who Do They Target? 💰
Washington, California, New York City, and several other states are proposing or enacting taxes specifically targeting households with net worth or income above $1 million.
On March 30, 2026, Washington State passed a 9.9% tax on household income of at least $1 million — while simultaneously rolling back its estate tax top rate from 35% to 20% to offset the blow. In California, a proposed ballot initiative would apply a one-time 5% tax on the net worth of residents with $1 billion or more as of January 1, 2026. That retrospective deadline has already triggered what advisors describe as an “exodus” of California billionaires. New York City is also considering a wealth tax proposal from its current mayoral administration.
According to the nonpartisan Institute on Taxation and Economic Policy, Washington State has historically operated one of the ten most regressive state and local tax systems in the nation — a fact that proponents of the new tax cite in its defense.
What Are the Most Effective Billionaire Wealth Tax Planning Strategies? 🏗️
The primary legal strategies include dynasty trusts, irrevocable trusts, Intentionally Defective Grantor Trusts (IDGTs), charitable planning, and interstate residency shifts.
1. Dynasty Trusts: Perpetual Wealth Transfer
A dynasty trust is an irrevocable trust structured to hold and pass wealth across multiple generations — in some states, indefinitely — without incurring gift, estate, or generation-skipping transfer taxes, depending on how the trust is established. About 20 states, including South Dakota and Nevada, allow dynasty trusts to exist in perpetuity. This makes them a particularly powerful vehicle in the current environment. As one trust attorney noted, “Jurisdictions that can handle dynasty trusts in perpetuity are going to be even more desired if there’s a state billionaire tax.” Setting up a dynasty trust in a favorable jurisdiction can shield substantial wealth from both state and future federal wealth tax proposals.
2. Intentionally Defective Grantor Trusts (IDGTs)
An IDGT is an irrevocable trust that is “defective” for income tax purposes — meaning the grantor still pays income taxes on trust earnings — but keeps assets outside the taxable estate for estate tax purposes. This creates an efficient way to transfer appreciation out of the estate while maintaining some income-tax-related control. The IRS under the current administration has issued favorable rulings on IDGTs, making now a particularly strategic window. A common funding technique: gift 10% of the asset value to the trust as a down payment, then sell the remaining 90% at fair market value in exchange for a promissory note. The interest payments create income for the seller while the underlying asset appreciates outside the taxable estate.
3. Revisiting Irrevocable Trust Asset Swaps
For clients who already have irrevocable trusts with “swap powers,” it may make sense to swap low-performing assets into the trust in exchange for higher-performing assets. This is a relatively low-risk technique that optimizes what’s inside and outside the trust for maximum future appreciation, particularly valuable if a state wealth tax applies at a specific valuation date.
4. Charitable Trust Planning
Charitable trust structures — including Charitable Remainder Trusts (CRTs) and Charitable Lead Trusts (CLTs) — allow the ultra-wealthy to create income streams, receive charitable deductions, and ultimately transfer significant wealth to heirs and charities. Depending on the structure, there’s either a gift to charity upfront or at the end of the trust’s term. These structures are IRS-recognized, well-litigated, and increasingly attractive as wealth tax proposals multiply.
| Strategy | Primary Benefit | Best For |
|---|---|---|
| Dynasty Trust | Multi-generation wealth transfer, avoids estate/GST tax | Billionaires in perpetuity-friendly states (SD, NV) |
| IDGT | Remove appreciation from estate, grantor pays income tax | High-growth assets: equity, real estate |
| Asset Swap in Irrevocable Trust | Optimize inside/outside trust for future appreciation | Existing trust holders with swap power provisions |
| Charitable Trust (CRT/CLT) | Income stream + charitable deduction + wealth transfer | Philanthropically inclined ultra-HNW individuals |
| State Residency Change | Full escape from state-level tax | Those with flexibility to relocate (TX, NV, FL) |
Moving out of a high-tax state sounds simple, but California is well-resourced and aggressive about auditing residency changes. We advise clients considering a move to document every element of their new domicile: voter registration, driver’s license, primary banking relationships, organizational memberships, and the physical location of their most significant assets. A half-measure will not satisfy California’s FTB. States like Nevada and Texas, by contrast, have no income tax and no formal residency audit programs of comparable scale.
Should You Move to Avoid a State Wealth Tax? 📍
Relocation is the most straightforward strategy, but it must be executed carefully — especially for California residents, whose FTB aggressively audits residency changes.
For many ultra-high-net-worth individuals, particularly those who already own homes in multiple jurisdictions, a formal change of primary residence to states like Texas, Nevada, Florida, or Wyoming is the logical first move. Calls from Washington State clients to wealth advisors have reportedly jumped 300% since the millionaire tax passed. But advisors consistently caution: don’t let the tax tail wag the dog. The most effective strategy is the one you can actually sustain — if you genuinely want to live in California, the disruption of a forced relocation may outweigh the tax savings.
Wealth advisors at major firms caution against being drawn into novel tax structures marketed as the “new latest and greatest” solution. Time-tested vehicles — dynasty trusts, charitable planning, IDGTs — are well-litigated and IRS-recognized. Brand-new schemes are likely to attract IRS scrutiny, particularly under the current administration’s favorable stance toward enforcing estate planning rules.
Key Takeaways
- State wealth tax proposals in Washington, California, and New York are prompting urgent planning among the ultra-wealthy
- Dynasty trusts, IDGTs, and charitable structures are the most established legal vehicles for shielding assets
- California aggressively audits residency changes — any relocation must be thoroughly documented
- Begin planning now while the current administration’s favorable trust rulings are in effect
