NING Trusts for California Residents: “Rumors of My Death Have Been Greatly Exaggerated”

By Steven J. Oshins, Esq., AEP (Distinguished)

Late last year, the California Franchise Tax Board announced that it was planning to bring legislation to abolish the use of Incomplete Gift Non-Grantor Trusts, otherwise known as “ING Trusts”.

The two states where most of these trusts are established are Nevada (“NING Trusts”) and Delaware (“DING Trusts”). However, since these trusts are non-grantor Domestic Asset Protection Trusts, this article will assume that the draftsman would select Nevada which is generally considered the number one asset protection trust jurisdiction.

The legislation was to be effective for any taxable income earned on or after January 1, 2022.


However, the proposed legislation never got a bill sponsor and therefore never got off the ground. The deadline to bring legislative bills in the 2021 session has now passed.

Therefore, NING Trusts are alive and well for California residents!!!


The term “NING Trust” stands for Nevada Incomplete Gift Non-Grantor Trust. Transfers to the trust are incomplete for gift tax purposes which means that there is no gift tax for any transfers to the trust. However, for income tax purposes, transfers to the trust are complete and the trust is a non-grantor trust so the trust pays all income taxes at its federal income tax brackets, except to the extent taxable income is distributed to beneficiaries of the trust.

Although there are additional uses, the primary objective when using a NING Trust is generally to avoid state income tax on taxable income that isn’t sourced to the settlor’s home state. Since the NING Trust is drafted as a non-grantor trust, the undistributed taxable income is taxed to the trust itself and therefore avoids the settlor’s state income tax provided that the trust has been designed around the settlor’s home state’s state income tax rules.


Prior to the Trump Tax Act, state income taxes paid were deductible against federal income tax. However, the Trump Tax Act limits the amount of the federal income tax deduction for state income taxes paid, real property taxes paid and sales taxes paid to a cumulative total of $10,000 per year.

The $10,000 is used up for property taxes only for many of our clients. Therefore, state income taxes paid are essentially no longer deductible!


The answer is no, they would be crazy.

There is no doubt that this proposed legislation had a negative effect on the amount of California state income taxes collected as it had to have contributed to the masses of wealthy California residents leaving the state and moving to a zero tax jurisdiction since the announcement of the proposed legislation.

Rather than only “losing” taxable income on the non-source income, California is also losing California-sourced income from those who moved.

Even if this were to work out as planned, the anticipated additional tax revenue for California was reasonably negligible.

Regardless, even if this were to pass, the more sophisticated estate planners know to use completed gift non-grantor trusts to work around it anyway similar to what estate planners have done for New York residents after New York passed similar legislation that took effect on January 1, 2014.


California residents wanting to save state income tax on non-California-sourced income just got a lifeline. We’ll see what happens in the next legislative session. But at this point, the proposed legislation is dead.


If you found this article interesting, you might also be interested in these other educational programs and products by Steve Oshins:


Steven J. OshSteven-Oshins43721143ins, Esq., AEP (Distinguished) is a member of the Law Offices of Oshins & Associates, LLC in Las Vegas, Nevada. He was inducted into the NAEPC Estate Planning Hall of Fame® in 2011. He was named one of the 24 “Elite Estate Planning Attorneys” and the “Top Estate Planning Attorney of 2018” by The Wealth Advisor. Steve was also named one of the Top 100 Attorneys in Worth and is listed in The Best Lawyers in America® which also named him Las Vegas Trusts and Estates Lawyer of the Year in 2012, 2015 and 2018 and Tax Law Lawyer of the Year in 2016 and 2020.  He can be reached at 702-341-6000, ext. 2, at or at his firm’s website,

Leave a Comment