Income tax

Gov. Gavin Newsom's 2023 budget includes a proposal to “reduce tax avoidance by wealthy Californians.” But will Californians choose simply to sit and watch ...

But if the grantor makes a complete gift, it’s a non-grantor trust that must pay tax on its income in the trust’s state of residence—unless the income is distributed to beneficiaries, who then pay the tax in their states of residence. If the grantor retains too many “strings of control,” the grantor trust is ignored for federal income tax purposes, and its income is included on the grantor’s personal return. Inclusion of the ING shutdown in Newsom’s 2023 budget is a strong step forward. Will Californians choose simply to sit and watch as the financial elite push their tax obligations onto you? The 40% federal gift tax, which kicks in after you and your spouse have transferred a mere $24 million in assets, will kill the economics of your scheme. Newsom’s proposal has struck a nerve among those who complain of the “ [prejudicial implications](https://windes.com/incomplete-gift-non-grantor-trust/)” for their profession, predict (without evidence) that this will [drive out the “more affluent](https://www.familywealthreport.com/article.php?id=197022#.Y_eNU-zMJhE)” from California, and threaten that the ING shut-down proposal will “ [invite a fight](https://www.venable.com/insights/publications/2023/01/incomplete-gift-non-grantor-trusts-created-by#:~:text=Under%20California%20Governor%20Gavin%20Newsom's,of%20its%20settlor%20in%20California).” And that’s where the “I” in ING comes in. They engage, for example, in a Getty family ritual—jetting off from their California homes each quarter to shore up the contention that their trusts are run from tax haven Nevada when they’re probably run from California. That’s easy for a California-based grantor to fix. [2023 budget](https://ebudget.ca.gov/2023-24/pdf/BudgetSummary/FullBudgetSummary.pdf) includes a proposal to “ [reduce tax avoidance by wealthy Californians](https://calbudgetcenter.org/resources/first-look-understanding-the-governors-proposed-2023-24-state-budget/)” by abolishing the ING tax dodge. Oh, and if you’re not a member of the ultrarich financial elite? They hook you up with notorious tax haven states like Nevada, South Dakota, and Wyoming, which eagerly cannibalize the personal income tax revenue streams of their sister states by creating fertile ground for these schemes.