A NING trust is an incomplete gift, non-grantor trust established in Nevada that lets a high-income resident of a taxing state shift investment income and capital gains out of their home state’s tax base. Because Nevada imposes no state income tax, a properly structured trust based there can accumulate income and gains without state-level tax. Because the transfer is structured as an incomplete gift, the assets stay in the grantor’s taxable estate and receive a stepped-up basis at death. Both results have to be achieved at the same time, and they pull in opposite directions.
What “Incomplete Gift Non-Grantor” Actually Means
The acronym spells out the structure. The “N” is Nevada. The “ING” is Incomplete gift Non-Grantor, and those two labels describe separate tax treatments that must both hold.
Non-grantor status is the income tax piece. A non-grantor trust is its own taxpayer. It files its own federal return and pays its own income tax, instead of the income flowing back to the person who created it. That is what unlocks the state tax savings: if the trust is a separate taxpayer and it sits in a state with no income tax, the income it earns escapes the grantor’s home state entirely.
Incomplete gift status is the transfer tax piece. When the grantor funds the trust, the contribution is not treated as a completed gift for federal gift and estate tax purposes. The assets still belong to the grantor’s taxable estate at death. That sounds like a drawback and it carries two benefits. First, funding the trust burns no lifetime gift tax exclusion. Second, because the assets remain in the estate, they generally receive a stepped-up cost basis to fair market value when the grantor dies. Stock originally purchased at $10 that is worth $100 at death passes to the beneficiaries with a $100 basis, and the unrealized gain accumulated during the grantor’s lifetime is wiped out for income tax purposes. The state tax shield runs during life, the federal basis step-up catches the gain at death, and both features depend on the gift staying incomplete.
How the Trust Threads the Needle
Under federal tax rules a trust becomes a grantor trust, meaning the grantor pays the income tax, when the grantor keeps too much control. A gift stays incomplete only when the grantor keeps some power over how the property is used. An ING trust has to satisfy both tests at once, and the mechanism is a distribution committee.
The distribution committee is usually made up of trust beneficiaries other than the grantor and the grantor’s spouse. Those members qualify as “adverse parties” because they have their own financial stake in the trust. Under Treasury regulations, a grantor’s power over distributions does not trigger grantor trust treatment when it can be exercised only together with someone who has a conflicting financial interest. The consent requirement is what keeps the trust classified as non-grantor.
At the same time, the grantor typically keeps a limited veto over distributions to other beneficiaries and often holds a testamentary power of appointment, meaning the ability to redirect trust assets through a will. Those retained powers are enough to keep the gift incomplete without pulling the trust back into grantor status. Draft too far in one direction and the grantor is on the hook for all the trust’s income tax. Draft too far the other way and the transfer becomes a completed gift that burns the lifetime exclusion. The drafting has to be exact, which is why ING trusts are the work of attorneys who specialize in them.
How Much You Actually Save
The point of the structure is to stop paying state income tax on investment income and capital gains. Nevada imposes no state income tax on individuals or trusts.1Nevada Department of Taxation. Income Tax in Nevada A non-grantor trust based there pays no state income tax even when the grantor lives in California or New York.
The numbers can be large. A resident of a state with a top rate above 10% who sells appreciated stock producing $2 million of capital gains would owe several hundred thousand dollars in state tax. If that stock were held in a properly structured NING trust, the state bill could drop to zero. The math works only when the trust retains the income. Distributions to a beneficiary who lives in a taxing state will generally be taxed by that beneficiary’s home state.
There is a real federal cost on the other side of the ledger. Non-grantor trusts face sharply compressed federal brackets. For 2026, a trust reaches the top 37% rate at just $16,000 of taxable income. An individual does not reach that rate until income exceeds roughly $626,000. Every dollar of trust income above $16,000 is taxed federally at the highest marginal rate, and the trust reports it on its own Form 1041.2Internal Revenue Service. Instructions for Form 1041 and Schedules A, B, G, J, and K-1
So the strategy is a trade. For residents of states with top rates above 10% and substantial income or gains to shelter, the state savings usually outrun the federal penalty. For residents of states with moderate rates, the compressed brackets can eat most of the benefit. Distributing income to beneficiaries carries it out of the trust and avoids the compressed brackets, but it also pulls that income back into a taxing state, which defeats the point. Most NING trusts are built to accumulate.
Multiplying the Qualified Small Business Stock Exclusion
One high-value use involves qualified small business stock under Section 1202. A shareholder who holds qualifying C corporation stock for more than five years can exclude a significant portion of the gain from federal tax on sale. For stock acquired on or before the applicable statutory date, the exclusion is capped at $10 million per taxpayer. Stock acquired after that date qualifies for a $15 million cap.3Office of the Law Revision Counsel. 26 USC 1202 – Partial Exclusion for Gain From Certain Small Business Stock
Because a non-grantor trust is its own taxpayer, it gets its own Section 1202 exclusion. A founder who transfers qualifying stock to a NING trust before a sale can potentially use the exclusion twice, once personally and once through the trust. Combined with the state tax shield, that can translate into millions of dollars of tax savings on a single transaction. The planning has to be done well ahead of any sale, because the stock still has to meet the holding period and other statutory requirements.
What Belongs Inside One
The structure works best for assets that produce large taxable income or gains that would otherwise be hit by state tax. Appreciated securities fit well: the trust can sell holdings and reinvest without triggering state capital gains tax. Closely held business interests approaching a sale can produce enormous one-time gains, and transferring the interest in before the sale can eliminate state tax on the proceeds. Qualified small business stock belongs here for the reasons above. Portfolios that throw off ongoing interest, dividends, or trading gains benefit from the continuing state tax shield.
Some assets do not fit. Real estate can create a tax obligation in the state where the property physically sits, regardless of where the trust is based. Retirement accounts cannot be transferred into a NING trust at all. The assets that produce the biggest benefit are intangible ones carrying high income or large embedded gains.
States That Have Blocked NING Trusts
Before setting one of these up, check whether your home state has already shut the door. Several high-tax states have enacted laws that neutralize the strategy for their residents.
New York moved first. In 2014 the state added a provision requiring residents who create ING trusts to include the trust’s income on their own state return, as if the trust were still a grantor trust for state purposes. The rule specifically targets incomplete gift non-grantor trusts and adds the trust’s net income back to the grantor’s state-adjusted gross income.
California followed in 2023 with Revenue and Taxation Code Section 17082. The California rule takes the same approach: a California resident who creates an ING trust must include the trust’s income in state gross income as though the trust were a grantor trust. The law contains a narrow exception for trusts that distribute at least 90% of their income to charitable organizations.4California Legislative Information. California Revenue and Taxation Code 17082
Other high-tax states are considering similar legislation. This is an area where the law is actively changing, and planning advice that was correct two years ago may no longer apply.
Why Nevada Over Delaware or Wyoming
Nevada is not the only no-income-tax jurisdiction for these trusts. The same structure in Delaware is called a DING and in Wyoming a WING, and the underlying mechanics are identical. Nevada’s edge comes from a trust-friendly legal framework built around the tax treatment.
Nevada law provides strong asset protection. Creditors generally cannot force the exercise of a trustee’s discretion to make distributions, and the state permits self-settled trusts in which the grantor is also a beneficiary without automatic alter-ego treatment for creditor purposes. By statute, an irrevocable trust declared as such is not construed as revocable merely because the settlor is also a beneficiary.5Nevada Legislature. NRS Chapter 163 – Trusts
To establish Nevada jurisdiction, the trust instrument designates Nevada as situs, and the trustee resides or does business in the state.6Nevada Legislature. NRS Chapter 164 – Administration of Trusts Most out-of-state grantors satisfy that by naming a Nevada-based professional trust company as trustee or co-trustee. The combination of no state income tax, strong asset protection, and developed trust case law is what keeps Nevada ahead of the alternatives.
Costs and Who It Fits
A NING trust is not a cheap document. The drafting has to maintain both non-grantor status and incomplete gift treatment at once, which means an attorney who specializes in this area. Legal fees typically run well above a standard irrevocable trust, often into the mid-five figures or higher depending on the assets involved.
Ongoing costs include trustee fees (professional trust companies charge annual fees based on assets under management), separate federal tax preparation on Form 1041, and in some cases investment or accounting fees. The administrative side matters too. The distribution committee has to function as a genuine decision-making body, and the trustee has to maintain proper records.
The strategy generally makes financial sense only for people with substantial investment income or large anticipated capital gains, typically those facing six-figure or higher state tax bills. For someone with moderate investment income in a middle-rate state, the setup and maintenance costs can exceed the savings. Before committing, have a tax advisor run real projections that account for the compressed federal trust brackets, the ongoing trustee fees, and the possibility that your home state enacts blocking legislation of its own.