A recent article in Forbes magazine highlights planning that I have utilized in my practice for almost 20 years, whereby we utilize a “DING” trust to transfer the taxable situs of an asset to Delaware, Nevada, South Dakota, Tennessee or another similar state in order to provide asset protection and avoid state income taxes.
The Forbes article references a couple of states. There are now 15 states which will work as the location for this type of planning. Which state is best depends on the circumstances and facts of a particular situation. In 1995 I started using Alaska trusts and then later in the 1990’s I began using exclusively Delaware trusts. I now utilize the jurisdictions of several states and particularly like Tennessee, but there are certain situations where Delaware will continue to be my preference.
Does it work? Absolutely. In the right circumstances, a business or low-basis marketable security or other asset may be able to be sold without triggering any state income tax. It’s fairly complicated and fairly costly so it’s not for small transactions. But, for the right situation, to do otherwise is simply like “leaving money on the table.”