For Washington high earners who cannot or will not physically relocate before ESSB 6346 attaches in 2028, trust structures sitused outside Washington are the most powerful remaining planning lever. Done correctly, a non-grantor trust in Nevada, South Dakota, or Delaware can shift investment income — interest, dividends, capital gains — out of a Washington resident's AGI and therefore out of Washington's income tax base.
Done incorrectly, these structures generate federal complications, invite state-level residency fights, and sometimes produce worse tax outcomes than leaving the income where it was. This post walks through what ING, NING, and DING trusts actually do, where they work, where they fail, and how they fit into a broader Washington-departure plan.
The basic idea
Washington's new income tax, like almost every state income tax, attaches to a Washington resident taxpayer. If you are a Washington resident, income you earn directly is yours and is subject to the tax (above the $1M threshold). Income that belongs to a different taxpayer is not.
The trick with ING-type trusts is to create a new taxpayer — a trust — that holds the income-producing assets, earns the income, and is not treated as a Washington taxpayer. The trust is deliberately structured to be a non-grantor trust for federal income tax purposes (so the settlor does not have to report the trust's income on their personal return) while still allowing the settlor to benefit from the trust (which is why they are called incomplete-gift non-grantor trusts).
Properly sitused in Nevada (NING), South Dakota (the original "DING" was Delaware but Nevada and South Dakota are now dominant), or Delaware, the trust's investment income is taxed only in its state of administration — which imposes no state income tax on trust income that lacks in-state beneficiaries or sources.
What these trusts actually do
Effectively, the INGs shift three categories of income out of a Washington resident's AGI:
- Portfolio income: interest, dividends, and capital gains on publicly traded securities held inside the trust.
- Passive investment income: distributions from private funds, private equity, and real estate partnerships held inside the trust.
- Future appreciation: any growth of assets contributed to the trust is earned at the trust level going forward.
These categories are not trivial. For a high-earner with a diversified $30M portfolio spinning off $900K/year of portfolio income, shifting that income to a non-grantor trust can remove $900K/year from Washington AGI — which, if the household otherwise clears the $1M threshold, represents roughly $89K/year of Washington tax savings. Over the course of a decade, that is a seven-figure planning outcome.
What these trusts do NOT do
This is where the advice gets technical and where we see the most expensive mistakes. ING trusts are narrow tools. They do not:
- Avoid federal income tax. The trust is a taxpayer in its own right and pays federal income tax on its undistributed income. Trust brackets are compressed — they hit the top federal bracket at roughly $15,000 of income — so undistributed income is federally more expensive than the same income in the settlor's hands. The planning requires distribution discipline.
- Shift earned income. Wages, salary, bonuses, guaranteed payments, and self-employment income remain the individual's and cannot be transferred.
- Defeat a clear domicile claim. If you are a Washington resident under common-law domicile, the trust shelters trust income, not your income. The tax on everything else — earned income, gains on personally held assets, retirement distributions — is unchanged.
- Survive aggressive anti-trust state legislation. California, New York, and more recently Massachusetts have enacted residency rules that tax ING-type trusts as in-state trusts when they have in-state settlors or beneficiaries. Washington may do the same.
- Work for already-appreciated assets you are about to sell. The settlor is still treated as the transferor for basis and holding-period purposes under §1015; a sale soon after transfer produces the same gain as a sale before transfer would have.
For the specific case of QSBS stacking, we have a dedicated guide: QSBS and Washington Residency, and you should also review QSBS Stacking Using Trusts: What Actually Works (and What Doesn't).
The mechanics, in plain English
To be effective, an ING-type trust must be:
- A non-grantor trust under IRC §§671–679, so that the settlor is not treated as owning the trust income. Achieved by giving adverse parties (other beneficiaries, distribution committees) the meaningful decision-making power over distributions.
- An incomplete gift for gift tax purposes, so that the settlor does not use federal gift tax exemption when funding it. Achieved by retaining a testamentary power of appointment and certain lifetime veto rights.
- Sitused in a state that does not tax trust income. Nevada, South Dakota, and Wyoming are the three dominant choices. Delaware remains usable but is slightly less tax-friendly than its newer peers.
- Administered from that state in a real way. Professional trustee in the situs state, trust records maintained there, trust administration performed there. A paper situs without substance is the easiest state-residency-audit loss of all.
- Funded with appropriate assets. Publicly traded securities, interests in private funds, passive real estate — all fit cleanly. Actively managed businesses fit poorly and can create unrelated-business-income and state-nexus complications.
Will Washington tax ING trusts directly?
This is the most important unresolved question under ESSB 6346. Washington has not yet issued implementing regulations on trust residency. Under existing Washington capital gains tax rules (RCW 82.87), a trust is a Washington resident for capital gains purposes based on the residency of the trust's grantor or beneficiaries — a framework that, if imported into ESSB 6346, could pull ING trusts back into the Washington base.
In New York, California, and Massachusetts, this is exactly what has happened: aggressive grantor-or-beneficiary-resident rules have effectively neutralized ING trusts for residents. The federal IRS also considered but did not finalize regulations in 2023 that would have treated INGs as grantor trusts outright.
Two practical implications:
- Move earlier rather than later. Trusts established and funded before Washington's implementing regulations issue have a stronger position than trusts established afterward.
- Pair with domicile change where possible. A personal move out of Washington by the settlor is the cleanest defense against any eventual Washington anti-trust rule.
Who should consider an ING-type structure
- Washington residents with significant investment portfolios (typically $10M+) producing material ongoing investment income.
- Households whose earned income alone is not over the $1M threshold, but whose investment income pushes them over.
- Households who for family, professional, or lifestyle reasons cannot physically relocate.
- Founders anticipating long-term wealth accumulation inside a single family line where dynasty-trust planning is also attractive.
Who should skip these structures
- Anyone who can cleanly relocate. A personal domicile change is more powerful, cheaper, and less brittle.
- Anyone primarily taxed on earned income (founders with salary and imminent exit gains — exits are usually better handled through QSBS planning and timing, not trust transfers).
- Anyone below ~$5M in portfolio assets. The administrative cost (setup, trustee fees, annual tax prep) rarely justifies the structure below that size.
- Anyone who wants effective complete control over the assets. These trusts require real, adverse-party involvement in distribution decisions, which is a real loss of control.
The honest cost picture
Expect:
- $25K–$75K to establish (legal drafting, trustee selection, funding).
- $10K–$30K/year ongoing (corporate trustee fees, trust tax return preparation, investment administration).
- Year 1 planning disruption while assets transfer and bookkeeping reorganizes.
The break-even is usually in the first year for households above $10M in portfolio assets throwing off $500K+ of annual investment income. Below that, the math is marginal and requires honest modeling before committing.
Takeaways
- ING, NING, and DING trusts are non-grantor trusts sitused outside Washington that can shift investment income out of the Washington income tax base.
- They work for passive investment income, not for earned income or for short-horizon liquidity events.
- They do not avoid federal tax; they may actually increase federal tax on undistributed income.
- They are vulnerable to Washington anti-trust residency rules if the state chooses to enact them — move early.
- They supplement, rather than replace, a personal domicile change.
Last reviewed: April 16, 2026. Nothing in this article is legal or tax advice. Trust planning is facts-specific and the structures described here have real downsides in specific situations.
