Using NING Trusts to Significantly Reduce State Income Tax Liabilities

Why Wealthy Families are Choosing to Shift Their Wealth to the Tax Favored State of Nevada

The state of Nevada is considered a tax-favored environment, allowing maximum tax protection over trusts and estates. That’s just one of the reasons why more and more people are choosing Nevada as to establish their trusts.

The “NING” trust or Nevada Incomplete-gift Non-Grantor trust reduces state income tax liabilities and simultaneously provides asset protection benefits.

For people with substantial income, assets or large capital gains who could generate significant Federal and state income tax shifting a trust from its current state to a state with more favorable tax laws, such as Nevada, could create significant income tax savings.

While moving to Nevada would allow someone to take advantage of these benefits, relocating family is often not an option. However, by establishing a NING and transferring assets from the existing trust into the NING, the trust will only face Federal capital gains taxes.

Non-Grantor vs. Grantor Trusts

Trusts are set up as either grantor or non-grantor, and it’s important to understand the difference.

Grantor trusts expose the creator of the trust to the taxes incurred by the trust. Non-grantor trusts are set up as their own entities incurring all taxes at the trust level instead of passing them on to the owner of the trust.

Things get murky because every state has its own taxation rules and definitions about which trusts should be considered a resident.

For example, to take advantage of a NING or Nevada’s favorable tax laws in general, a non-grantor trust with a Nevada trustee should be established. By establishing a non-grantor trust in Nevada and appointing a Nevada trustee you can be sure that you’ll minimize or completely eliminate taxes from your state of residence.

A New Aggressive Strategy for Substantial Gains

If a substantial gain is on the horizon, wealthy families can take advantage of ING trusts to adopt a more aggressive tax strategy. ING’s help reduce state income tax at the trust level by establishing it one or more years before a large gain becomes available.

One word of caution, there are specific steps you should follow to ensure that your strategy is not viewed as tax evasion, it’s always best to employ professional guidance to understand how to establish your ING ethically.

Structuring a NING for Maximum Benefit

Since the purpose of establishing a NING trust is to avoid additional taxing, it’s important to properly structure the trust to avoid gift tax. Proper structuring also ensures that the trust really is taxed in Nevada instead of the settlor’s home state.

Remember that NING stands for Nevada Incomplete-Gift Non-Grantor Trust, so when assets are transferred to the trust, it must be in the form of an “incomplete gift.”

Transferring assets as an “incomplete gift” allows the owner of the trust to include your investments in your estate without needing to file a Form 709 gift tax return.

NING Trusts vs. DING Trusts

The DING Trust did come before the NING trust, so one may wonder which is the better situs for a trust, Nevada or Delaware?

While both states allow settlors to appoint a grantor for their trust and take advantage of favorable tax laws, several Delaware rulings have allowed divorcing spouses and creditors to gain access to an asset protection trust. Nevada has never allowed such access in rulings and therefore has more iron clad protection than any other state.

How the Other States Feel About ING Trusts

It’s no surprise that other states aren’t happy about non-grantor trusts and their tax-avoidance benefits, some have even gone as far as banning such trusts.

While both Delaware and Nevada have successfully deflected attempts by other states to tax grantors, that likely won’t stop states from attempting to gain access whenever they can.

However, several statutes in the state of Nevada prove that the state values and protects trusts and estates which are established there and is the safest bet when choosing where to create an ING trust.

To learn more about establishing a NING, please contact Alliance Trust Company.

Alliance Presentations in San Diego – Recap of the Gathering

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Last month Alliance Trust presented at the Southern California Institute’s annual “Gathering” of elite advisors from around the country in San Diego.  The topics of the two-day seminar included a panel debating the best family trust jurisdictions, and various methods and strategies to minimize and reduce estate, state and federal income taxes.  Advisors discussed asset protection trusts and other Nevada trust options, with case studies on how they work in practice.  As a Nevada Trust Company, Alliance Trust added insight and expertise on these topics from the perspective of a trustee.  Nevada is considered to have the best trust laws in the country, providing families valuable asset protection, flexibility for planning options and tax minimization for generations.  for more information on Nevada Trusts, please call Greg Crawford at Alliance Trust in Reno at 775-297-4684.

Awareness of NING Trusts Growing Nationally

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Nevada Incomplete Non-Grantor Trusts (or, “NINGs”) are growing in popularity and usage across the country.  NINGs provide the grantor of the trust asset protection and the potential to minimize local and state income taxes on investable/intangible assets.  As this NASDAQ.com Article on NINGS, these types of trusts are not for everyone.

However, a family living in a high-income tax state with significant taxable income and appreciated investments (or investments expected to appreciate) can benefit from a NING. This is just one of many Nevada trust planning strategies that makes Nevada the Asset Protection Trust Rankings   If you are interested in learning more about NINGs, please read this Article by attorney Gordon Schaller and call Greg Crawford at Alliance Trust Company in Reno at 775-297-4684.

Alliance Trust Proud to Participate in Prestigious UCLA Law Panel

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Gregory E. Crawford, TEP, President of Alliance Trust Company of Nevada recently participated in a 90-minute discussion panel covering the topics of asset protection planning and the impact of the Uniform Voidable Transfer Act (UVTA).  The panel was moderated by Professor Jerry Hesch (ACTEC Fellow), and included nationally-recognized attorneys Jeffery M. Verdon and John R. Garland, as well as Neal Rubin, Managing Director, International Custody & Asset Protection Solutions of City National Rochdale.  Nevada was highlighted by the panel as one of the best jurisdictions in the United States and world for estate planning.  The UCLA Law School STEP Conference is in its fifth year and attracts hundreds of trust and estate professionals from around the world to Newport Beach, CA each January.  For more information, please review the conference details or call Greg Crawford in Reno at 775-297-4684.

The California Budget and Future Income Tax Outlook – NINGs Anyone?

As this article in the Economist just noted, another attempt to diversify the tax base in California failed when lawmakers passed a $115 billion dollar budget June 19th.  The revenues recognized by the state continue to be highly cyclical, and dependent on high-income earners and capital gains.  With a recovering economy, things are currently going well in the Golden State.  However, the portion of revenue raised via income taxes cyclical) continues to increase and the top 1% of wage earners pay over half of the taxes in the state.  All of this suggests that future taxation policies in California will not change, and the chances of Proposition 30’s higher tax rates sun setting in 2018 are next to zero.  If you are in a high tax bracket in California, one strong option to consider is to move your intangible assets (investments) to Nevada via trust.  As its own tax paying entity in Nevada, your family trust (a NING Trust)  would not be subject to California taxation. Please call Greg Crawford at Alliance Trust in Reno at 775-297-4684 for more information.  Nevada has some of the best and most flexible trust laws in the country – it is worth a phone call to find out if Nevada has options for your family.

Updating an Antiquated Family Trust in Nevada

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Many people are beneficiaries of family trusts that have antiquated terms and provisions that no longer make sense.  Yet many people also believe that they are “stuck” with the terms of the trust and that them simply have to live with the terms regardless moving forward.  This is not true.  Certain states, including Nevada, allow for modifications to be made to even an irrevocable trust.  Modifications can be made to extend the term of the trust, change the situs of the trust, and add or modify powers of appointment.  As this recent Forbes magazine article points out, you might even save taxes for the trust as part of this process.  Nevada is considered to have some of the best trust laws in the country and has very flexible statutes for modifying trusts.  For more information, call Greg Crawford in Reno at 775-297-4684.

Nevada Trusts That Trim Your State Income Tax

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The Wall Street Journal recently wrote about a popular strategy involving trusts in Nevada and a handful of other states.  The NING trust, which stand for “Nevada Incomplete Non-Grantor” Trusts shift investments from the home state to Nevada,which has no state-level income tax.  For people in California and other high-tax states, this can be a very powerful strategy.  As the article notes, there are a few considerations and risks, but for those with sizable portfolios, and angel and venture capital investments, using a NING to hold these investments can trim or even eliminate local-level taxes.  Nevada is consider the best state in the country to establish your family trust and has received an A+ from Forbes magazine for its trust laws.  You do not have to live in Nevada to establish a trusts here.  Please call Greg Crawford, Co-Manager of Alliance Trust in Reno at 775-297-4684 for more information.

State of the Union to Propose Stealth Increase of Estate Taxes

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The Wall Street Journal and numerous other media outlets are reporting that the State of the Union address on Tuesday will outline a proposal by the President to effectively increase estate taxes.  In the proposal, appreciated assets in an estate would not receive an updated or “stepped up” tax basis on death.  Only a small amount of gains, suggested as $200,000 in portfolio assets and $500,000 in a primary residence would be shielded from tax.  Although these numbers may seem large, ask many families what their tax-cost basis is in desirable places to live, such as Silicon Valley and other parts of California, and you will see that this proposal would capture many more families with a taxable event on death even without a formal change to the estate tax rules.  There are many estate planning strategies that can help with families facing estate tax burdens.  Some of the best strategies use Nevada Trusts – the best state for asset protection and tax minimization.  Please call Greg Crawford in Reno at 775-297-4684 for more information.

Nevada – Best for Asset Protection Trusts

Welcome-to-NevadaThe State of Nevada has some of the finest and most flexible trust laws in the country, and you don’t have to live in Nevada to establish and benefit from a Nevada Trust.  By using a Nevada trust, you can better protect your family and charitable interest for generations to come.  Tax saving are also possible in certain situations.  In this recent Trusts and Estates magazine article, the 15 states which offer asset protection trusts are listed and detailed.  When you look at the key factors to selecting where to establish your family trust, Nevada checks all important boxes.  For more information, call Greg Crawford in Reno at 775-297-4684.

Celebrity Estate Planning Lessons for 2014 – Apply Them in 2015

Looking back on the year for estate planning news, there are lessons that can be learned from many high-profiles estates – both good and bad.  Some successful estate stories?  Joan Rivers had the proper end-of-life documents in place, and Robin William’s estate successfully avoided probate.  On the other hand, Phillip Seymour Hoffman paid $34 million in unnecessary estate taxes and uncertainty in Tom Clancy’s plans has led to an $80 million legal battle.  All of these celebrity estate planning examples can be boiled down into everyday considerations for everyday people – you can apply the following tips to your own situation. 

1)  Think about the people you want involved in your trust – family member, corporate trustee, or perhaps co-trustee roles?

The selection of your trustee(s) is very important – ultimately they are ones which will carry out your wishes expressed in the trust and be responsible for keeping accurate bookkeeping records, filing tax returns, prudently investing trust assets and reporting to trust beneficiaries.

2)  Planning for Changing Circumstances

Families are more mobile and fragmented than ever before.  Multiple marriages and children from prior relationships are common.  State laws which govern the disposition of assets for those that die without and estate plan do not reflect modern society – the result?  Often times loved ones are disinherited.  A proper estate plan prevents this from happening.

3)  The IRS is always a consideration

Tax considerations exist at all phases in life – including death.  A properly structured estate plan can minimize estate taxes and maximize your goals for family and charitable interests.

4)  Review regularly

The most important tip – review your estate plan.  not only do aspects of your life change, but the laws change too.  Are your charitable interest changing?  Did a named beneficiary pass away or become incapacitated? Did your successor trustee move away?   Is a beneficiary about to get a divorce?  All of these common changes in life can have a dramatic impact on your plan.  It should be reviewed regularly.

Nevada has some of the best trust laws in the USA, and many families outside of Nevada choose Nevada as a location for their family trust.  Nevada trust law better protects your assets for your family and charitable interests, and can be designed to last 100′s of years.  Most other states do not offer this amount of flexibility.  To learn more about Nevada Trusts call Greg Crawford in Reno at 775-297-4684.

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