“Delaware Incomplete Non-Grantor” Trusts (commonly referred to as “DING Trusts”) are trusts used to avoid state income tax by having the trust sitused in a jurisdiction that will not tax the accumulated income and capital gains in a non-grantor trust. (However, the state income tax savings will have to balanced against the higher federal income tax rates and the 3.8% Medicare tax that applies to undistributed trust income over the low threshold of $11,950 if the settlor would not have been subject to those taxes if the trust had not been created.) No DING Trust rulings have been issued for five years. The status of DING trust rulings has been in doubt for several reasons, but apparently the IRS is now comfortable issuing rulings, at least with for trusts structured like the one in PLRs 201310002-201310006. While these identical rulings are favorable, they do confirm the position suggested in CCA 201208026 that a settlor’s retention of a testamentary power of appointment over a trust does not render the full transfer to the trust as an incomplete gift.
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