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 Trust Company of Nevada in The Economist

The Economist

Typically well-reasoned and published since 1843, many believe that the Economist is the finest English-print magazine in the world.  The magazine tackles complex global issues with a balance and perspective that only a 170+ year history can provide.  That is why, in the context of the media fury surrounding the “Panama Papers,” that the Economist’s suggestion to publish individual global tax returns (April 9th edition) deserved to be publically questioned.  To the credit of the publication, Gregory Crawford’s letter to the Editor is published in the April 30th print edition.  In the letter, the President of Alliance Trust argues that no benefit will come from such a disclosure plan or the OCED’s related “Common Reporting Standards.”  The impact of sharing detailed personal financial information with rogue governments around the world will not increase U.S. tax revenues by a cent.  In fact, the only meaningful outcome of the proposals is to violate basic personal privacy significantly increase the physical and financial risk to law-abiding citizens and their families around the world.

The Government of Kazakhstan knows my retirement account balance?

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The New York Times “Room for Debate” opinion pages recently asked Gregory Crawford, The President of Alliance Trust Company in Reno to comment on the Panama Papers and the advantages of and lawful usages of shell companies.  In this piece, Greg notes that the vast majority of these companies are used legally, providing a layer of security and privacy for international families in an increasingly dangerous world.

The interest of non-US citizens using foreign grantor trusts in Nevada is increasing dramatically.  Many countries are now recklessly sharing highly-sensitive and otherwise confidential individual financial information with rogue governments around the world under the OCED’s “Common Reporting Standards.” This program, which thankfully the United States is not participating in, gathers and automatically exchanges individual  names, addresses, tax identification numbers, and financial account balances with the governments of Azerbaijan, Cameroon, China, Georgia, Indonesia, Kazakhstan, the Philippines, Russia, Senegal, Tunisia, and Uganda, to name a few.  Where the information might go from there, no one knows.   Many of these countries have Horrific human rights records and serious corruption issues.  Automatically sharing this data will undoubtedly expose law-abiding individuals to the risk of extortion, kidnapping or worse.  The United States should remain proudly “non-compliant” with the CRS and its efforts to violate personal privacy.

it is worth noting that the State of Nevada offers excellent privacy provisions when establishing business entities such as LLCs, and there are options for the US and non-US citizens to keep their financial affairs private in trust.  Please contact Alliance Trust for more information at 775-297-4000.

 

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.

Why Sand Hill Road Uses Nevada Trust Strategies

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Alliance Trust Company of Nevada spends significant time in Silicon Valley.  Our clients range from early stage Angel investors, the founders of many fast-growing technology firms, and the partners of some of the most prestigious venture capital firms in the world.  Why are so many people connected with Sand Hill Road using Nevada Trust strategies?  In a word: Flexibility.

Nevada offers exclusive options within its trust and estate laws, and you don’t have to be a Nevada resident to establish and benefit from a Nevada Trust for generations to come.

Simply put, Nevada offers flexibility around common asset protection, tax-minimization, and dynasty provisions that have many around the country recommending Nevada as the best state in the country for trusts.  Even Business Week magazine recently took notice, putting Reno on the cover for its trust and estates activity.

Interested in learning more?  Call Greg Crawford, President of Alliance Trust in Reno at 775-297-4684.

Bloomberg Businessweek Highlights Reno for Trust Benefits

Business Week Cover

The cover story of this week’s Bloomberg Businessweek Magazine highlights the successful effort of the State of Nevada, Reno in particular, in attracting assets from affluent international families.

The attraction to Northern Nevada includes:

-Nevada’s favorable trust and estate laws

-Experienced attorneys in Reno

-Excellent CPAs and trust companies in Reno

-The overall stability of the US legal system

Privacy and tax concerns also impact the decision to move assets from Europe to Reno.  The United States, as well as the money centers of Europe, recognize Nevada as the best jurisdiction for trusts.  The growth of the Nevada Trust industry since 1999 has been nothing short of remarkable.  A Bloomberg video report and radio report (begins at the 1:34 minute mark) are also available.

Alliance Trust Company of Nevada is proud to be a key player in Reno’s trust industry development since 2005.  For information on how Dynasty Trusts, self-settled trusts, and Nevada’s excellent corporate laws may help you achieve your family’s goals, please call Greg Crawford, President of Alliance Trust Company in Reno at 775-297-4684.

Alliance Trust Proud to Participate in Prestigious UCLA Law Panel

UCLA STEP Asset Protection

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.

Hilary Clinton calls for Higher Estate Taxes

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Despite government assurances that the recent estate tax regulations were “permanent,” nothing is really forever or permanent in Washington DC.  Democratic front-runner Hilary Clinton has recently proposed on the campaign trail a higher effective estate tax rate, lowering the estate tax exemption amount by more than $2 million per person, and increasing the marginal tax rate on taxable estates from 40 to 45%.  It is estimated that this will double the annual number of households subject to the tax, raising $400 to $500 billion over the next decade.  Nevada trust strategies can be an excellent estate tax “freezing” technique to reduce or eliminate estate tax.  Please call Greg Crawford, President of Alliance Trust Company in Reno at 775-297-4684.

Children Facing Challenges and Your Estate Plan – You Have Options

estate-planning

For a family dealing with children with handicaps or other challenges, the journey does end when the child turns age 18.  Many parents and families worry about how their adult children will fare after the parents pass away.  Fortunately,  a well crafted family estate plan can provide solutions to these problems.  Children with medical difficulties and handicaps may need a special needs trust to preserve eligibility for government aid and other programs that could be jeopardized by a sudden influx of wealth. For children dealing with substance abuse, a special purpose trust could be the answer.  In some cases, a family may consider disinheriting a child to prevent an inheritance from furthering a destructive lifestyle.  While this is an option, special legal care is needed to ensure that money does not fall into the wrong hands and situation.  Nevada is considered the best state in the country for estate planning, and may offer options and flexibility for your family’s estate plan that your home state does not.  And you do not need to be a resident of Nevada to establish and benefit from a Nevada trust.  Contact Philip Brown at Alliance Trust in Reno at 775-297-4277 to learn more about the advantages of a Nevada Trust.

Californians Using NING Trusts to Protect Assets and Trim Taxes

Lake Tahoe

Alliance Trust Company in Reno has a sizable client base in Silicon Valley, as many prominent residents in this influential area look east to Nevada when doing their estate planning.  Nevada is considered to have the best trust laws in the country, with dynasty trusts, asset protections features and no income taxes in a private, non-public structure.  Many Bay Area residents ski and vacation in Lake Tahoe, so establishing trusts in Nevada doesn’t seem as foreign as it does in South Dakota, or Delaware.  Recently, after an IRS Private Letter Ruling, a new type of trust is rapidly gaining popularity, the NING Trust.  This type of trust, known also as a “Nevada Incomplete Non-Grantor Trust” removes investments in trust from California taxes. In this excellent article by Southern California attorney Gordon Schaller, the detailed options for California residents using NINGs is covered.

 

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