By Joe Wallin | April 9, 2026 | ~7 min read
If you are a Washington resident with a high income and you have been reading about incomplete gift non-grantor trusts — sometimes called NING trusts (Nevada), DING trusts (Delaware), or WING trusts (Wyoming) — as a way to avoid the state's new 9.9% income tax, I have bad news: the Legislature anticipated this strategy and shut it down.
ESSB 6346 includes explicit anti-avoidance provisions that pull ING trust income back into the grantor's Washington taxable income. If you are a Washington resident and the grantor of an ING trust, the trust's income counts toward your Washington income tax liability — regardless of where the trust is established.
But the story doesn't end there. While ING trusts are dead for Washington income tax purposes, other trust-based strategies may still have a role in your planning. This post explains what happened, why, and what options remain.
What Is an ING Trust?
An incomplete gift non-grantor trust is a particular type of irrevocable trust that occupies an unusual intersection of tax law. Here is how it works:
For federal income tax purposes, the trust is treated as a separate taxpayer — a non-grantor trust. It files its own return and pays its own taxes. This is the key feature: the trust, not the grantor, recognizes the income.
For federal gift tax purposes, the transfer to the trust is treated as an incomplete gift. This means the grantor does not use any of their lifetime gift tax exemption, does not need to file a gift tax return, and retains certain powers over trust distributions.
The combination of these two features is what makes ING trusts attractive for state tax planning. If you are a resident of a high-tax state and you establish an ING trust in a no-income-tax state like Nevada, Delaware, or Wyoming, the trust recognizes the income (not you), and the trust is located in a state that does not tax it. The income escapes your home state entirely.
This strategy has been used successfully by residents of states like New York, California, and others with high income tax rates. It was only a matter of time before Washington's Legislature addressed it.
How Washington Blocked It
Section 307 of ESSB 6346 adds ING trust income back to the Washington resident grantor's taxable income. The mechanism is straightforward: if you are a Washington resident and the grantor of an incomplete non-grantor trust (as defined under IRC Sections 671-679), the trust's income is included in your computation of Washington base income.
This is not ambiguous. The Legislature specifically targeted this structure. The provision mirrors similar anti-ING rules already adopted by California (S.B. 131, effective 2023) and New York.
Notably, Washington's capital gains tax — enacted in 2021 and upheld in Quinn v. State (2023) — already included anti-ING provisions for capital gains. ESSB 6346 extends that same logic to all income.
The bottom line: if you are a Washington resident, establishing an ING trust in Nevada, Delaware, Wyoming, South Dakota, or anywhere else will not reduce your Washington income tax liability. The income gets pulled back to you.
What About Existing ING Trusts?
If you already have an ING trust, you should review it with your attorney. The trust may still serve valuable non-tax purposes — asset protection, estate planning, creditor protection, privacy — even though its state income tax benefit is now gone for Washington purposes.
The key question is whether the costs of maintaining the trust (trustee fees, administrative expenses, annual filings) are justified by the remaining benefits. For some people, the answer will be yes. For others, it may make sense to decant the trust into a simpler structure or dissolve it.
Do not make this decision in a vacuum. The trust may interact with your estate plan, your asset protection strategy, and your other tax planning in ways that are not immediately obvious.
Trust Strategies That May Still Work
While ING trusts are blocked, not all trust-based planning is foreclosed. Here are strategies that may still be relevant for Washington residents under ESSB 6346:
Completed Gift Non-Grantor Trusts
Unlike an ING trust, a completed gift non-grantor trust involves an actual completed gift to the trust. The grantor gives up sufficient dominion and control that the transfer is treated as a completed gift for gift tax purposes.
Why does this matter? Washington's anti-avoidance provision specifically targets incomplete non-grantor trusts — trusts where the grantor retains enough control that the transfer is an incomplete gift. A trust with a completed gift is a different animal. The trust is a separate taxpayer, and if it is a non-grantor trust sited in a no-income-tax state, the income may not be subject to Washington tax.
The catch: a completed gift is a real gift. You are using your lifetime gift tax exemption ($13.99 million in 2026 under the OBBBA). You are giving up control over the assets. And depending on the trust's terms, you may not be able to get the assets back. This is a fundamentally different commitment than an ING trust, where the grantor retains significant control. It requires careful planning and is not appropriate for everyone.
Charitable Remainder Trusts (CRTs)
A charitable remainder trust lets you transfer appreciated assets into a trust, receive an income stream for a period of years or for life, and direct the remainder to charity. The transfer generates a federal charitable deduction, and the trust itself is tax-exempt.
For Washington income tax purposes, the key question is whether the income stream paid out to you as the beneficiary counts toward your Washington taxable income. It likely does — CRT distributions to a Washington resident would be included in federal AGI and therefore in Washington base income. But the CRT may still provide significant value: it allows you to diversify a concentrated position without immediately recognizing gain, it reduces your taxable estate, and the charitable deduction offsets income in the year of the contribution.
Combined with Washington's $100,000 charitable deduction, CRT planning may be a meaningful tool for high earners with large appreciated positions.
Grantor Retained Annuity Trusts (GRATs)
A GRAT is a trust in which the grantor transfers assets and retains an annuity for a specified term. If the assets outperform the IRS hurdle rate (the Section 7520 rate), the excess passes to the remainderman — typically the grantor's children — free of gift tax.
GRATs are primarily an estate tax planning tool, not an income tax tool. The trust is a grantor trust for income tax purposes, meaning all trust income is taxed to the grantor. That means GRATs do not help reduce Washington income tax. But they remain an extremely powerful way to transfer wealth to the next generation at minimal transfer tax cost — and given Washington's estate tax (with rates up to 20% on estates over $12.1 million), estate tax planning remains critical.
Irrevocable Non-Grantor Trusts for Beneficiaries
If you are making gifts to children or other beneficiaries, an irrevocable non-grantor trust established in a state with no income tax may still provide income tax benefits — but for the beneficiaries, not for you. If the trust accumulates income and does not distribute it, the income is taxed to the trust. If the trust is sited in a no-income-tax state and has no Washington-source income, the trust's income may not be subject to Washington tax.
This is a long-term planning strategy focused on the next generation. It does not reduce your Washington income tax liability, but it may reduce the overall tax burden on family wealth.
The Broader Lesson
Washington's approach to ING trusts illustrates a pattern we are seeing across states with new or expanded income taxes: the Legislature moves fast to close planning loopholes, and it does so with targeted anti-avoidance provisions rather than broad rules.
This has a practical implication for planning: the window for any particular strategy may be shorter than you think. The capital gains tax included anti-ING provisions from day one. ESSB 6346 did the same. Future legislation may target other structures — completed gift trusts, CRTs, entity structures — as the state gains experience with enforcement and revenue data.
The best approach is not to search for a single silver bullet, but to build a diversified planning strategy that uses multiple tools: entity structure, income timing, charitable giving, trust planning, and (if appropriate) domicile planning. No single strategy will eliminate your Washington tax liability entirely, but the right combination can reduce it significantly.
What to Do Now
If you are a Washington resident with household income above $1 million (or expect to be above that threshold by 2028), here is what I would recommend:
If you have an existing ING trust: Talk to your attorney about whether the trust still serves its non-tax purposes. Do not assume the trust is useless — but do not assume it is saving you Washington taxes, because it is not.
If you were considering an ING trust: Redirect your planning. The ING trust will not work for Washington income tax purposes. Consider whether a completed gift non-grantor trust, CRT, or other structure is appropriate for your situation.
If you are doing broader tax planning: Think about the full toolkit. Entity choice (C corp vs. S corp vs. LLC), the PTE election, income timing, Roth conversions, charitable strategies, and installment sales all interact with trust planning. The best outcomes come from coordinating multiple strategies, not relying on any single one.
If you want to discuss how trust planning fits into your overall Washington tax strategy, book a free introductory call.
Related Posts:
- The Pass-Through Entity Tax Election, Explained
- C Corp vs. S Corp vs. LLC: How Washington's Income Tax Changes Entity Choice
- Charitable Giving Strategies to Reduce Your Washington Income Tax
- Estate Planning Before 2028: How Washington's Income Tax Changes the Calculus
- Roth Conversions Before 2028: The Window Is Closing
