With New Jersey and New York being two of the higher income tax states (New Jersey’s top marginal rate is 10.75% and New York City residents face a top combined rate approaching 13%), an easy recommendation is for clients to go south. Florida (among other states) does not impose a state income tax. The income tax differential between Florida and New Jersey (or New York) was not as pronounced prior to the effective repeal of the federal State and Local Income Tax (SALT) deduction. That’s because the SALT deduction reduced the effective state income tax by up to 39.6% (in 2017). However, as of 2018, the SALT deduction is limited to $10,000. As a result, many wealthy northerners experienced a significant income tax increase. So, as an estate planning attorney, I advised clients to move to a state with no income tax (like Florida) and use SPF 50. 

But alas, many of my clients can’t move, or don’t want to move. They have local business interests or family up north. Proximity to grandchildren is an unbelievably motivating force. Some simply like all the amenities that the New York/New Jersey metro region has to offer. Others simply cringe at the thought of moving to God’s waiting room. Luckily, some clients can use non-grantor trusts to provide a partial solution to their state income tax problem.