Thursday, February 21, 2019
The tax reforms reflected in the 2017 Tax Cuts and Jobs Act continue to influence high net-work clients, especially the increased estate tax exemption, which at the moment is temporary until 2026. Incomplete Non-Grantor trusts, or ING trusts, can generate significant savings both in income taxes and in overall transfer taxes, meaning that it can be worthy to explore the ING trust strategy.
Central to the ING trust strategy is the presence of an “adverse party or parties" that have the ability to control the distributions of the trust to its beneficiaries. The parties can often include the creator of the trust or even the adult children of the creator. In many states - except New York - ING trusts enjoy reduced income taxes or even no state income tax at all. ING trusts are usually created in states that do not tax trust assets regardless of where the client lives.
Both the proposed and final Section 199A regulations complicate many non-grantor trust strategies by adding a new provision that requires aggregation of two or more trusts in certain circumstances. This is generally required when the trusts have substantially the came beneficiaries or grantors. For tax saving purposes, ING trusts will be most valuable to clients who have multiple natural beneficiaries who can each serve as beneficiary of one trust.
See Robert Bloink and William H. Byrnes, ING Trusts: The Hot Trend in HNW Estate Planning, Think Advisor, February 13, 2019.
Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.) for bringing this article to my attention.