Residences Without Borders: A Strategic Guide to Owning Luxury Properties Across Multiple States

The rhythm of the American luxury life has always followed the seasons. A winter residence in Palm Beach or Scottsdale. A summer estate on a New England lake or in the Adirondacks. Perhaps a mountain retreat in Aspen or Jackson Hole for the weeks between. It is an enviable way to inhabit the country—and, without the proper financial and legal architecture supporting it, an unexpectedly costly one.

The complexities that accompany multi-state property ownership are not widely understood until they arrive, often in the form of a tax notice or an insurance dispute. For individuals whose net worth is substantially tied to real estate holdings in several jurisdictions, the stakes of mismanagement are considerable. Conversely, those who approach the question strategically—ideally before the second or third property is acquired—discover that the same landscape of regulations and structures that creates complexity also offers meaningful opportunity.

The Domicile Question: Where Do You Actually Live?

The foundational issue for any owner of multiple residences is domicile: the state that considers you a legal resident for tax purposes. The distinction matters enormously. States such as California, New York, and New Jersey impose income taxes at rates that can exceed thirteen percent on high earners. Others—Florida, Texas, Nevada, Wyoming, and South Dakota—levy no personal income tax whatsoever.

Establishing domicile in a no-tax or low-tax state is entirely legal and, for individuals with the flexibility to organize their time accordingly, entirely achievable. It is not, however, automatic. High-tax states have grown increasingly sophisticated in challenging domicile claims, and the burden of proof rests with the taxpayer.

The standards vary by state but generally require demonstrating both physical presence and the genuine center of one's life in the claimed domicile. New York, for example, applies what is known as the "statutory residency" test: if you maintain a permanent place of abode in New York and spend more than 183 days in the state during a tax year, you may be taxed as a New York resident regardless of where you claim to be domiciled. California's Franchise Tax Board is similarly aggressive, scrutinizing factors ranging from where one's closest social ties reside to where vehicles are registered and physicians are consulted.

For those who have established—or intend to establish—a primary residence in a tax-advantaged state such as Florida or Nevada while maintaining a second estate in a higher-tax jurisdiction, meticulous documentation is essential. Advisors typically recommend maintaining detailed travel logs, registering vehicles and voter affiliations in the domicile state, and ensuring that the preponderance of meaningful life activity—charitable board memberships, medical appointments, professional engagements—occurs there as well.

Ownership Structures: The Case for Entities

Beyond domicile, the manner in which each property is held carries significant financial and legal implications. Direct personal ownership is the most straightforward approach, but it is rarely the most advantageous for individuals with substantial real estate portfolios.

Limited Liability Companies remain among the most widely used vehicles for holding investment and second-home properties. An LLC established in the state where the property is located provides liability insulation—protecting personal assets from claims arising from the property—while offering flexibility in how income and expenses flow through to the owner's personal return. For properties that generate rental income during periods of non-occupancy, the LLC structure can also facilitate the deduction of operating expenses with greater clarity.

Revocable living trusts serve a complementary purpose. By holding properties within a trust, owners can ensure that real estate transfers to heirs outside the probate process—a significant advantage when properties span multiple states, each of which would otherwise require its own probate proceeding. For estates of sufficient size, irrevocable trusts and family limited partnerships introduce additional layers of estate tax planning that warrant discussion with a qualified attorney.

For those who own properties across several states, a holding company structure—wherein a parent LLC or corporation holds interests in individual property-level entities—can provide both organizational clarity and a measure of additional protection. This approach is particularly common among owners of resort properties or estates that are periodically rented.

Capital Gains and the Art of the Exit

When the time comes to sell a luxury property, the tax treatment of any gain depends significantly on how long the property was held, how it was used, and in which state it is located. Federal capital gains rates on real estate held longer than one year are currently capped at twenty percent for high-income taxpayers, with an additional 3.8 percent net investment income tax potentially applicable.

The primary residence exclusion—which permits individuals to exclude up to $250,000 in gain ($500,000 for married couples) from federal taxation—applies only to a property that has served as the taxpayer's principal residence for at least two of the five years preceding the sale. For owners who rotate among multiple homes, careful attention to which property qualifies for this treatment in any given tax year can yield meaningful savings.

State-level capital gains taxes vary widely. Some states tax gains at the same rate as ordinary income. Others offer preferential rates or no capital gains tax at all. A strategic decision about which property to sell in a given year, or how to structure a sale across installments, can meaningfully alter the after-tax outcome.

Insurance Across Jurisdictions

High-value properties present insurance challenges that standard homeowner policies are not designed to address. Estates with replacement values in the millions require specialty coverage—often through insurers such as Chubb, AIG Private Client Group, or Pure—that provides guaranteed replacement cost, agreed value on contents, and liability limits commensurate with the owner's overall wealth exposure.

When properties span multiple states, insurance coordination becomes a deliberate exercise. Flood risk profiles differ dramatically between a lakefront estate in Michigan and a coastal villa in South Carolina. Wildfire exposure in a Colorado mountain retreat requires underwriting treatment entirely distinct from that of a Palm Desert compound. Umbrella liability policies must be structured to provide seamless coverage across all locations, and the named insureds on each policy should align with the ownership entities holding each property.

Seasonal Living as a Managed Portfolio

For those who approach their collection of properties with the same intentionality they bring to other aspects of wealth management, the rewards extend well beyond tax efficiency. A well-structured portfolio of luxury residences—each property held in an appropriate entity, each jurisdiction's requirements thoughtfully addressed—becomes a platform for living with genuine freedom.

The estate on the lake in summer. The warm-weather villa as winter deepens. The mountain property for the shoulder seasons. Each residence fulfilling its purpose at precisely the right moment, the financial architecture beneath it humming quietly, invisibly, ensuring that the life being lived above it remains as uncomplicated as it is exceptional.

At Villa du Lac, we believe that extraordinary properties deserve extraordinary stewardship—not only in their design and maintenance, but in the strategic thinking that allows their owners to inhabit them fully, confidently, and with enduring peace of mind.