TL;DR
- HNW families ($5M+ net worth) need tax strategy that coordinates with estate planning, investment management, and business interests — not just an annual return.
- The five recurring conversations: entity structure, residency and SALT planning, real estate tax strategy, estate/gift planning, and charitable strategy.
- A small fee paid for proactive tax strategy typically returns 10-100x in saved tax over a decade.
- Bay Area HNW families face California-specific challenges: 13.3% top bracket, Prop 19 property tax reassessment, and the SALT cap on $10K of state tax deduction.
High-net-worth tax strategy isn’t about finding more deductions — it’s about coordinating decisions across business, investment, family, and estate dimensions so the right amount of tax is paid in the right year by the right entity. Here are the five conversations Milestone has annually with each HNW Bay Area family we serve.
Conversation 1: Entity Structure & Compensation
For business owners, the choice between S-corp, C-corp, partnership, and disregarded entity flips the math on payroll tax, QBI deduction (§199A), and exit treatment. Reasonable compensation in an S-corp must be defensible. C-corp’s 21% rate looks attractive — until you consider double tax on distributions and the loss of QBI.
Conversation 2: Residency and SALT Planning
California’s 13.3% top rate (14.4% with mental health surcharge over $1M) is the highest in the U.S. Combined with the $10K SALT cap federally, a $1M California earner can pay 50%+ marginal. Pass-through entity tax (PTET) under AB 150 recovers most of the federal deduction. For those who can credibly leave California, the residency change requires factual evidence beyond just a moving truck.
Conversation 3: Real Estate Tax Strategy
Real estate is the most tax-advantaged HNW asset class. Real Estate Professional Status (REPS), cost segregation, 1031 exchanges, Delaware Statutory Trusts (DSTs), and Opportunity Zone funds all deliver large benefits when properly structured. Most HNW families with $2M+ real estate exposure are leaving 5-figure annual savings on the table.
Conversation 4: Estate, Gift, and Generation-Skipping Tax
The federal estate/gift exemption is $13.61M per person (2024) — but sunsets in 2026 to ~$7M unless Congress acts. Annual exclusion gifts ($18K/recipient in 2024), gift-splitting, GRATs, and dynasty trusts can transfer significant wealth out of the taxable estate. California has no separate estate tax — but Prop 19 reassesses inherited property.
Conversation 5: Charitable Strategy
Donor-Advised Funds, charitable remainder trusts, charitable lead trusts, and qualified charitable distributions from IRAs each have different tax mechanics. Bunching multiple years of giving into a DAF in a high-income year locks in the deduction; the DAF then grants over time. Appreciated stock gifts avoid capital gain and deduct at fair market value.
Frequently Asked Questions
What net worth qualifies as “high-net-worth” for CPA purposes?
There’s no formal threshold, but in our practice, HNW typically begins around $3M-$5M in investable assets — at that level, coordinated tax/estate/investment planning starts producing measurable savings.
How often should an HNW family meet with their CPA?
Quarterly check-ins plus a structured year-end planning session. Annual-only contact misses too many time-sensitive elections and gift planning windows.
Do I need a separate tax planner and tax preparer?
No — the right CPA does both. Splitting the work introduces gaps and finger-pointing. Milestone’s engagement model integrates planning, preparation, and post-filing follow-up.
Ready to Talk?
For HNW Bay Area families looking for proactive tax strategy rather than annual return filing — Schedule a 30-minute consultation with a Pleasanton CPA who works with clients in your situation every week.
Written by the Milestone Team
Ronak Bhatt, CPA, MBA
Founder · Milestone Certified Public Accountants · Pleasanton, CA
This article is for general information and does not constitute tax, legal, or investment advice. Individual situations vary; please consult a CPA before making tax elections. Milestone CPAs is licensed in California and serves clients across the Bay Area and Tri-Valley.
