According to Bloomberg Business, more Americans who are living
outside the U.S. gave up their citizenship in the first quarter of 2015
than ever before. (see article at http://bloom.bg/1zOKGM2).
The reason is that last year asset disclosure rules under the Foreign
Account Tax Compliance Act (“FACTA”) kicked in. FACTA requires U.S.
financial institutions to impose a 30 percent withholding tax on
payments made to foreign banks that don’t agree to identify and provide
information on U.S. account holders. The new laws, combined with past
rules, can make tax filing difficult for U.S. citizens living overseas
who set up trusts. In short, the complexity of the law, increasing tax
liability, and the cost of compliance are prompting U.S. Citizens to
throw in the towel and pledge allegiance to a different flag.

The good news is that one does not have to leave building to save
taxes. Trusts such as a Nevada Incomplete Gift Non Grantor Trust (also
called a “NING”) are gaining in popularity for those residing in high
income tax states. The benefit of a NING is that it includes asset
production along with the elimination of state income taxes because the
trust is located in a state with no income tax. For a California
Resident, the savings can be substantial considering that the top
marginal state income tax rate in California can reach 13.3%. If a
California resident implemented a NING Trust, unrealized capital gains
and investment portfolio income would be shielded from California income
tax under many circumstances.  Sounds too good to be true, doesn’t it?
Well, no. It is true. The Franchise Tax Board has stated that if a
non-California trustee could make distributions in the trustee’s discretion
to a California beneficiary, the undistributed income of such trust
should not be subject to California tax. You don’t even have to leave
California.

View Attorney Profile

Robert J. Lamm

Licensed since 1999

Member at firm Cummins & White, LLP

RECENT POSTS

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Robert J. Lamm

Licensed since 1999

Member at firm Cummins & White, LLP

RECENT POSTS

  • How sound of mind is a sound mind?
    Posted on March 25, 2015
    Topic: Trusts and Estates

    One of the most common reasons for challenging the validity of a will or a trust is lack of mental capacity.  One can put in all the no contest clauses that they want.   If the signer doesn’t have mental capacity, the document will fail.   Moreover, depending on the type of estate planning document, there are ... Read more

  • The Decision, Part II
    Posted on July 10, 2014
    Topic: Estate Planning

    On July 8, 2010, Cleveland Cavaliers fans anxiously awaited the “Decision” of star NBA player LeBron James. In what turned out to be a made for television 75 minute spectacle of supreme narcissism, King LeBron pronounced to the masses that he would be taking his talents to South Beach. Fast forward to the present and ... Read more

  • Laughing all the way to the bank?
    Posted on May 30, 2014
    Topic: Estate Planning

    I stumbled across an interesting piece this morning by Nick Lum on how Donald Sterling may actually benefit from a forced sale of the Los Angeles Clippers. The article can be found here. The author’s point is that if Donald Sterling has to sell the team by decree of the other owners, it is possible ... Read more