NING & DING Trusts: How to Eliminate State Income Tax Without Moving
NING & DING Trusts: How to Eliminate State Income Tax Without Moving
CORE INSIGHTS
- The Opportunity: Residents of high-tax states (CA, NY, NJ) face ~13% state tax on top of federal. A NING/DING Trust moves the “tax home” of your assets to a zero-tax state.
- The Strategy: By transferring assets to a Nevada/Delaware trust before a liquidity event, the trust (a NV resident) realizes the gain at 0% state tax.
- The Catch: It must be an “Incomplete Gift” (no gift tax) and “Non-Grantor” trust (separate taxpayer). You give up some control to a corporate trustee.
You can’t escape the IRS, but you can escape California. NING/DING Trusts allow you to legally “move” your portfolio to a tax haven while you stay in your beach house.
- Incomplete Gift: Retain “Power of Appointment” to avoid Gift Tax.
- Non-Grantor: Trust is a separate entity for State Tax.
- Result: Trust pays 0% (NV Tax), you pay 0% (CA Tax).
*Only works for intangible assets (Stocks/Crypto), not real estate.
What-If Scenario: $20M Business Sale (CA Resident)
| Metric | Personal Sale | NING Trust Sale |
|---|---|---|
| Federal Tax (23.8%) | $4,760,000 | $4,760,000 |
| State Tax (13.3%) | $2,660,000 | $0 |
Visualizing the Savings
*Figure 1: Net Proceeds. The Green bar (NING) keeps the state tax portion in your pocket.*
Strategic Action Steps
Fund the trust BEFORE signing a binding sales agreement (LOI). If you sign first, the “Assignment of Income” doctrine kills the strategy.
Hire a local trustee in NV/DE to establish situs. You cannot manage it from your home state.
Use this for Stocks, Crypto, or Business Interests. Real estate located in CA/NY is always taxed by location, so NINGs don’t work for property.
The Bottom Line: Who Should Choose What?
- Do This: Residents of high-tax states with >$5M unrealized gains in intangible assets.
- Avoid This: NY residents (loophole closed in 2014) or small gains where legal fees eat the savings.
Frequently Asked Questions
What is a NING or DING Trust?
Nevada (or Delaware) Incomplete Gift Non-Grantor Trust. It’s a trust that acts as a separate taxpayer in a zero-tax state to shield assets from home state tax.
How does it save money?
If you live in CA (13.3% tax) and sell a $10M asset, you owe ~$1.33M. If the NING Trust (NV resident) sells it, the state tax is $0.
Is this strategy aggressive?
Yes. States scrutinize it. It requires flawless execution, a corporate trustee, and no ‘sourced income’ from your home state.