This article is for informational purposes only and is not intended as investment advice, an offer, or a recommendation to invest in any security. All investments carry risks, including the potential loss of principal.
If you live in a high-tax state like California, New York, or New Jersey—and you’re a high-net-worth individual—it probably feels like too much of your hard-earned wealth is claimed by state taxes. For successful professionals, entrepreneurs, and investors, the search for legitimate ways to minimize tax liability is never-ending. Enter the ING Trust—a sophisticated wealth strategy that has been transforming the way the affluent manage, grow, and preserve their capital, though recent legislative changes have significantly altered the landscape.
What Is an ING Trust?
The “ING” in ING Trust stands for “Incomplete Non-Grantor Trust.” In simple terms, this is an irrevocable trust structure, typically formed in states that do not tax trust income—like Nevada or Wyoming. The trust is designed to legally help high-income individuals in high-tax states shield certain income from state taxes—without having to physically move or give up control over their assets.
Irrevocable and Non-Grantor
Irrevocable
Once assets are transferred in, they can’t readily be taken out or redirected at a whim—this gives the trust stability and additional protection from creditors.
Non-Grantor
The trust, not the individual who created it (the “grantor”), is taxed on income. Therefore, the trust location (in a zero-tax state) determines the tax treatment—not the grantor’s high-tax home state.
Incomplete Gift
The transfer of assets to the trust is intentionally structured as “incomplete,” so for federal gift and estate tax purposes, the assets are still treated as belonging to the grantor. This means no immediate gift tax liability and assets remain available for step-up in basis at death.
How ING Trusts Work
The basic structure of an ING Trust is elegantly simple—but must be executed with precision. Here’s the general outline:
- The individual (“grantor”) creates a trust in a state like Nevada or Delaware.
- Assets—often highly appreciated stocks, business shares, or investment portfolios—are transferred into the trust.
- The trust is the taxpayer for income it earns. Because it is established in a zero-tax state, that state does not tax the trust’s income.
- Historically, high-tax states could not tax the trust’s income if it was structured properly, avoided holding “sourced” (in-state) income, and followed all legal requirements.
Example: Selling a Business
Imagine a New Jersey resident about to sell their interest in a business for a $10 million gain. Without planning, the state could claim significant state income tax. With a properly structured ING Trust in a favorable jurisdiction, the trust sells the business, and the gain could potentially avoid New Jersey income tax (as New Jersey has not enacted anti-ING legislation as of 2025).
*Federal taxes still apply, but for many high-net-worth individuals, the state tax savings can be substantial.
The Key ING Trust Benefits
- Potential State Tax Savings (Where Still Available): In jurisdictions where still available, the most compelling benefit is significant reduction or complete elimination of state income tax on certain income.
- No Need to Relocate: For many, moving to a lower-tax state is not viable due to family, business, or lifestyle ties. The ING Trust structure lets you remain in your city while potentially gaining tax advantages.
- Retain Access and Flexibility: The trust can be drafted so the grantor retains the power to receive distributions, change trustees, or modify certain administrative provisions. This “incomplete” status ensures no federal gift tax is triggered and keeps wealth accessible under many circumstances.
- Additional Wealth Protection: Because the trust is irrevocable and separate from your personal estate, it often provides enhanced asset protection against creditors, lawsuits, and, in some cases, ex-spouses.
- Estate Planning Friendly: Assets in the trust remain in the grantor’s estate for step-up in basis—a significant advantage for heirs, who receive assets with their fair market value at the time of death, potentially eliminating capital gains tax on prior appreciation.
Who Should Consider an ING Trust?
This strategy isn’t for everyone and has been significantly limited by recent legislation. It may still be suited for:
- High-net-worth individuals or families in high-tax states that have not enacted anti-ING legislation (primarily New Jersey and other states excluding CA and NY)
- Those with large unrealized capital gains—such as founders, entrepreneurs, executives, or investors
- Residents planning to sell a business, valuable real estate, or a large block of appreciated stock
- People seeking to keep their primary residence but legally shift tax liability where permitted
However, ING Trusts involve complexity and expense. They are most effective when tax savings substantially outweigh implementation costs, typically for transactions worth millions.
Critical Legislative Updates: State Crackdowns
California’s Ban (Effective 2023)
California Governor Gavin Newsom signed Senate Bill 131 on July 10, 2023, which treats ING trusts as grantor trusts for California state income tax purposes. This law is retroactive to January 1, 2023, meaning California residents must report ING trust income on their state tax returns even for existing trusts. The only exception is for trusts that distribute 90% or more of their income to charitable organizations.
New York’s Earlier Action (2014)
New York enacted Tax Law Section 612(b)(41) in 2014, treating incomplete gift non-grantor trusts as grantor trusts for New York residents. This law has been in effect for over a decade.
New Jersey’s Current Status (2025)
Unlike California and New York, New Jersey currently recognizes ING trusts and treats them as non-grantor trusts for state income tax purposes, making it one of the remaining viable jurisdictions for this strategy.
ING Trust Case Study
Maria, a New Jersey Entrepreneur
Maria owns 100,000 shares of a tech company, acquired years ago at a very low basis. Her company is about to go public, and she expects to realize $15 million in capital gains. New Jersey’s top income tax rate is 10.75%. That’s a potential $1.6 million state tax liability.
The Solution:
Maria’s advisors establish a Nevada ING Trust (“NING”) before the liquidity event. She transfers her company shares into the trust, which sells them post-IPO. With proper planning and compliance, and because New Jersey has not enacted anti-ING legislation, the gain may be recognized in Nevada, where there is no state income tax on trust income. Maria potentially escapes the $1.6 million New Jersey state tax bill.
Note: This strategy would NOT work for California or New York residents due to their anti-ING laws.
What Assets Work Best?
- Marketable securities and stocks
- Partnership or business interests (especially just prior to a sale)
- Investment portfolios
Assets that do not work: real property or tangible assets located in the high-tax state, or income “sourced” to the home state, as those states will assert tax rights regardless of trust location.
Key ING Trust Limitations and Risks
State Legislative Prohibitions
California (2023) and New York (2014) have enacted specific legislation to eliminate the state tax benefits of ING trusts for their residents. These laws treat INGs as grantor trusts for state income tax purposes, requiring residents to report trust income on their personal tax returns.
Requires Expert Drafting and Administration
- The trust must be established in a zero-tax state with an independent trustee in that state
- Administration, record keeping, and legal advice must be meticulously managed
- Failure to comply can destroy the tax benefits—and create new tax problems
Legal, Set-Up, and Maintenance Costs
Creating and maintaining an ING Trust involves substantial legal and annual costs. For major transactions in permitted jurisdictions, the tax savings may still outweigh these expenses.
Future Changes in State Law
States can—and do—change laws to recapture revenue lost to strategies like ING Trusts. California and New York have already acted, and other states may follow. There is ongoing risk that future legislation may limit or negate the benefits.
When Not to Use an ING Trust
- If you are a California or New York resident (due to anti-ING legislation)
- If all assets are real property or other assets “sourced” to a high-tax state
- For small or uncertain gains, as costs may exceed benefits
- Without a proven, multidisciplinary team (legal, tax, financial) to implement and maintain structure
The Future of ING Trusts
The ING Trust landscape has changed dramatically. While they remain viable in jurisdictions like New Jersey, Delaware, Nevada, and Wyoming (for residents of states without anti-ING laws), the strategy requires even more careful analysis given the legislative trend toward closing this planning opportunity.
As governments grow more aggressive in protecting tax revenues, the structure will likely face continued challenges. For now—properly executed ING Trusts in appropriate jurisdictions can still produce significant, legal results.
Conclusion: A Potential Game-Changer for the Right Household in the Right State
While complex and facing increased legislative restrictions, ING Trusts can still provide significant benefits for high-net-worth residents in states that have not enacted prohibitive legislation. The strategy has been eliminated for California and New York residents but may remain viable for residents of New Jersey and other states.
For those in appropriate jurisdictions looking to maximize after-tax wealth and preserve capital for generations, a well-structured ING Trust—supported by the right professionals and domiciled in the right state—could still be a valuable strategy, though the window of opportunity continues to narrow as more states consider similar legislation to California and New York.
Before proceeding with an ING Trust, consult with experienced legal and tax advisors who are current on the latest state law developments. The landscape continues to evolve, and what works in one state may be prohibited in another.