Rich Californians May Lose Access to This Profitable Tax Loophole

California wants to crack down on a type of trust that lets the very wealthy avoid state income and federal gift taxes.

An incomplete non-grantor trust (ING) is a specialized form of trust designed to shift the tax base of its assets.

In 2014 , New York state banned the use of ING trusts to avoid state taxes.

California Gov. Gavin Newsom has proposed closing a tax loophole known as the incomplete non-grantor trust.

This is a structure used by the very wealthy to avoid paying state income taxes and federal gift taxes.

Grantors take three basic steps to set up an ING trust: Create a trust that is legally based in a state with no taxes on income and capital gains.