OIW Trust Associates LLC

Representation l Protection l Administration

Escaping State Income Tax

Residents Can Escape State Tax with Trusts in No-Tax States Like Wyoming

Residents can avoid state income taxes on investments and assets by moving them to a trust in Wyoming where there is No State Income Tax on assets, asset appreciation and income held and accumulated in a Wyoming Qualified Spendthrift Trust.

And, there is No Corporate Income Tax; No Gift or Inheritance Tax; No Capital Gains Tax; No Tax on Mineral Ownership; and No Minimum Capitalization Requirement for Unregulated Private Family Trust Companies either.

If you live in a high-tax state, You have options.

The State must overcome the constitutional nexus burden which has been upheld by the US Supreme Court, and affirmed in recent lower court rulings and simply put…a state MAY attempt to impose a tax policy that runs contrary to the due process clause of the Fourteenth Amendment of the Federal Constitution, but there is NO state tax policy that can supersede Federal Law.

Recent Pennsylvania Appeals Court Case Strikes Down Pennsylvania Income Tax on Pennsylvania Resident Trusts

Tax Court of New Jersey.Having determined that Trust A does not have sufficient contacts to New Jersey for the state to tax its undistributed income from sources outside New Jersey, it follows that Trust A owes no taxes on the $98,002 of interest income earned in the year in question.

In Residuary Trust A u/w/o Fred E. Kassner v. Director, Division of Taxation, the New Jersey Tax Court held that, even though it was dealing with a resident testamentary trust that owned stock in four New Jersey S corporations, the Due Process Clause of the U.S. Constitution prevented New Jersey from taxing undistributed income of the resident trust because its sole trustee and its assets were located outside New Jersey. http://caselaw.findlaw.com/nj-tax-court/1624818.html 

Illinois Appellate Court Holds Imposition Of Income Tax On Trust With Insufficient Connections Violated Due Process

In Blue v. Department of Treasury, the Michigan Court of Appeals considered whether Michigan could tax the income of an inter vivos trust created by a resident. In concluding that imposition of Michigan tax in the circumstances would violate the Due Process Clause of the Fourteenth Amendment, the court said:

Wealthy N.Y. Residents Escape Tax With Trusts in Nevada

Wyoming Trusts for Colorado Residents: Reduced Income Tax, Asset Protection, and Other Advantages

Wyoming Trusts for California Residents:
Reduced Income Tax, Asset Protection, and Other Advantages Christopher M. Reimer*


January 2009 Planning to Minimize or Avoid State Income Tax on Trusts
[by Richard W. Nenno, Esq. Managing Director and Trust Counsel]

…Or, suppose that Gotham Greta, a New York City resident, died in 2004 leaving $1,500,000 of stock in her family’s film business to her brother, Yonkers Yorrick, as trustee, to use her GST exemption. In 2007, the business was sold and the trust incurred a $1 million long-term capital gain. Having spoken with Laura, Yorrick paid the New York State and City income tax on the gain by year end. Accordingly, the trust paid $104,851 of New York State and City tax on December 31, 2007, and$149,786 of federal income tax on April 15, 2008. But, if Greta had structured the trust to avoid New York tax, including by appointing her other brother, Philadelphia Phil, as trustee, the trust would have owed $0 of state and city tax and $149,786 of federal income tax.

About the Author: Dick has more than three decades of estate planning experience, is admitted to the practice of law in Delaware and Pennsylvania, and is a Distinguished Accredited Estate Planner.

1 comment:

  1. I am very thankful to you for sharing this excellent knowledge. This information is helpful for everyone. So please always share this kind of information. Thanks. Property Owners Liability Insurance for business in New York