Structuring Incomplete Gift Non-Grantor Trusts: Key Provisions, Tax Planning, Trust Situs, Distributions, and More

This CLE/CPE course will guide estate planning professionals on using incomplete gift non-grantor trusts (INGs) to reduce or avoid state income taxes. The tax savings can extend to federal income tax and estate tax savings as well. In a lively discussion, the panel will address applicable federal tax rules and challenges, key provisions and planning strategies when structuring these trusts, minimizing state taxes, navigating the differences between jurisdictions that allow for incomplete gift non-grantor trusts, and asset protection attributes.

There are many benefits of incomplete gift trusts. INGs can ensure the transfer of an asset to the desired beneficiary while retaining a basis step-up for assets at death. INGs can provide liability protection for a donor while allowing the donor to regain control of the asset, including distributions and investment control if needed. Additionally, INGs can help avoid state and federal income taxes. However INGs have been rejected by several states who make their veracity as a national resource questionable.

An ING is a non-grantor trust. The trust pays the income tax as a non-grantor trust, subject to the laws of the jurisdiction of the trust and where its fiduciaries live. Along with other planning techniques such as irrevocable grantor trusts, GRATs and CLATs, the ING trust had certain features that are superior, but certain limitations that will be explained.

An ING can be part of a business sale for business owners seeking to implement a pre-sale planning strategy. These trusts reduce or eliminate potential state income taxes and capital gains taxes upon the sale of a business and can assist in eliminating federal taxes and allocating the tax across perhaps multiple assets while also providing asset protection. Considerations of the contributed assets, state law, and their income tax status make a difference.

Listen as our experienced panel explains the benefits provided by INGs for business owners contemplating a sale in the areas of estate planning, state taxation, federal taxation, and asset protection.