You are planning to sell your business. Someone — a wealth manager, a lawyer, a fellow owner — mentions an ING trust. The pitch: move your shares into a trust in Nevada or Delaware, and New Jersey’s 10.75% never touches the gain.
The honest answer is more careful than the pitch. An ING can be worth modeling for some New Jersey owners. It also carries strict design rules, an active IRS caution flag, and real legislative risk. New York has already made that risk concrete.
This guide covers where New Jersey law stands in 2026 and what the IRS has said. It also covers what has to be true before an ING earns a place in your exit plan.
What an ING trust is
ING stands for incomplete-gift non-grantor trust. A NING is the Nevada version; a DING is the Delaware version. The structure has to get three things right at once:
- Incomplete gift. You keep enough power over who ultimately receives the assets. That keeps the transfer from being a completed gift under IRC section 2511 and Treas. Reg. 25.2511-2. No gift tax, and no use of your lifetime exemption.
- Non-grantor status. The trust must not be a grantor trust under IRC sections 671 through 679. If it were, all of its income would land right back on your return.
- A distribution committee. Distributions to you need consent from a committee of beneficiaries. They are “adverse parties” under IRC section 672(a), because money paid to you is money they lose. Their consent power is what keeps the trust a separate taxpayer.
Get all three right and the trust — not you — is the income taxpayer. Form it in a state with no income tax, and the state-level tax on its income may go away.
That is the theory. The rest of this post is about what stands between the theory and your closing.
Why New Jersey owners ask about INGs
New Jersey’s Gross Income Tax tops out at 10.75% on income over $1,000,000, under N.J.S.A. 54A:2-1 and P.L. 2020, c.94. The same rate schedule applies to individuals and to estates and trusts. It draws no distinction for gains from selling a business.
Illustrative example — results vary: on a $5,000,000 stock-sale gain, most of the gain sits in the top bracket. The New Jersey tax alone could exceed $500,000. Numbers that size are why owners in towns like Saddle River and Alpine raise the ING question.
The state tax is only one layer of an exit. Our guide to selling a business in New Jersey covers asset vs. stock structure and the C-9600 bulk sale notice. It also shows where NJ BAIT fits.
Where New Jersey law stands in 2026
No New York-style ING statute — yet
New York closed this door for its residents. New Jersey has not. As of July 1, 2026, no New Jersey statute treats an ING as a grantor trust.
Nothing like New York’s rule appears anywhere in Title 54A of the official New Jersey statutes database. Those statutes run current through P.L. 2025, c.306. A new bill could change that at any time.
Read that for what it is. Statutory silence is not a safe harbor, and it is not a promise about next year.
The trust never stops being a New Jersey resident trust
Under N.J.S.A. 54A:1-2, an irrevocable trust funded by a New Jersey domiciliary is a resident trust. That label attaches when you fund it and never falls away — even if every trustee sits in Nevada.
What a resident trust actually pays turns on its nexus facts:
- Where do the trustees sit?
- Where are the assets?
- Where does the income come from?
That layer lives in Division of Taxation guidance, not in the statute. It is exactly the detail a CPA must confirm against current state guidance before you rely on the plan.
Distributions come home taxable
Whatever the trust achieves, N.J.S.A. 54A:5-3 taxes trust income that is paid or credited to a New Jersey resident beneficiary. Take the money out and spend it in Bergen County, and New Jersey taxes it to you. At best, an ING addresses income the trust keeps and reinvests.
New York’s cautionary tale — and why it matters here
New York enacted Tax Law section 612(b)(41) in 2014. A New York resident who funds an ING now adds the trust’s income back to their own return. The state treats the trust as if it were a grantor trust.
The state’s guidance is TSB-M-14(3)I. Three details should get your attention:
- It was retroactive. Signed March 31, 2014, it applied to tax years beginning January 1, 2014 — months before the ink dried.
- The exit window was narrow. Only trusts fully liquidated before June 1, 2014 escaped.
- It targeted exactly this structure. The statute defines the incomplete-gift non-grantor trust by its two federal legs and taxes it by name.
New Jersey’s legislature could copy that playbook, retroactivity included. A trust formed this year could be caught mid-plan. A sound ING model prices in that risk instead of assuming the current silence lasts.
The IRS will not bless your ING
Since January 2021, the IRS has refused to issue private letter rulings on ING structures. The current no-rule list, Rev. Proc. 2026-3, names the design in detail (sections 5.01(5), (6), and (13)):
- The incomplete-gift leg under section 2511
- The grantor-trust leg under sections 673 to 677
- The distribution-committee design itself, described almost clause for clause
The same items first appeared in Rev. Proc. 2021-3. Favorable rulings issued before 2021 cannot be repeated for a new trust.
There is also fresh Chief Counsel attention on the beneficiary side. In CCA 202352018, the IRS found beneficiaries made taxable gifts. The trust had been modified, with their consent, to expand the settlor’s access.
Do ING committee members make a gift each time they approve a distribution to the settlor? That question is live and unresolved.
None of this makes an ING abusive by itself. It does mean anyone forming one today does so without advance IRS assurance — and should be comfortable with that.
What has to be true before an ING is worth modeling
An ING earns a spot in your exit plan only when all of these line up:
- The sale structure keeps the gain out of New Jersey sourcing. Gain that is New Jersey-source income generally stays taxable to the trust no matter where the trustee sits. Asset vs. stock structure drives this — see the asset sale vs. stock sale comparison before anything gets signed.
- No New Jersey trustees, assets, or source income — maintained through the sale and after, not just on day one.
- You can leave the money in the trust. Under N.J.S.A. 54A:5-3, distributions to New Jersey residents are taxed to them.
- You have time. The trust must own the interest well before a letter of intent. Late transfers invite challenge.
- You accept the risks. No IRS ruling, possible retroactive legislation, and open questions on the committee members’ gift exposure.
- The math still wins after costs. Out-of-state trustee fees, drafting, and annual trust returns all reduce the benefit.
If several of those fail, better-settled levers may deserve the first look. For a C-corporation stock sale, the federal exclusion under IRC section 1202 may shelter part of the gain. Our QSBS and New Jersey tax guide covers the 2026 rules.
Installment timing and charitable planning belong in the same conversation.
Model it before you believe it
An ING is a modeling exercise, not a brochure decision. The inputs are your projected gain, your sale structure, your distribution needs, your risk tolerance, and the current state guidance.
Owners in similar situations have found the model says “no” as often as “yes.” Finding that out early is the win.
ProAxis is a licensed New Jersey CPA firm. We help owners:
- Model the after-tax outcome of a sale with and without trust planning
- Check the sale structure against New Jersey sourcing before the LOI locks it in
- Coordinate the tax model with trust counsel — the trust document itself is a lawyer’s job
- Fold the trust question into the wider wealth-transfer picture
If a sale is on your horizon, start with our tax planning services and estate and gift tax planning. Or schedule a consultation to talk it through. The best time to ask the ING question is a year or more before the deal.
Frequently Asked Questions
Do ING trusts still work for New Jersey residents in 2026?
Sometimes — and only with careful design. As of July 1, 2026, New Jersey has not enacted a New York-style statute taxing ING trusts as grantor trusts. That is statutory silence, not a safe harbor. Whether an ING helps depends on sale structure, trust design, distribution plans, and current Division of Taxation guidance.
What is an ING or NING trust?
An ING is an incomplete-gift non-grantor trust that pays its own income tax. The transfer stays an incomplete gift under IRC section 2511, so no gift tax applies. The trust avoids grantor-trust status under IRC sections 671 through 679 because an adverse-party committee must approve distributions. A NING is an ING formed under Nevada law; a DING uses Delaware.
Did New York shut down ING trusts?
Yes, for New York residents. NY Tax Law section 612(b)(41) puts an ING’s income back on its New York settlor’s return. The change took effect March 31, 2014, retroactive to tax years beginning January 1, 2014. New Jersey has no equivalent statute as of July 1, 2026.
Will the IRS approve my ING trust in advance?
No. Rev. Proc. 2026-3 keeps ING structures on the IRS no-rule list, at sections 5.01(5), (6), and (13). Both federal legs and the committee design are named, and the posture has been continuous since January 2021. A new ING is formed without advance IRS assurance, and older favorable rulings cannot be repeated.
Does an ING trust avoid New Jersey tax on money I take out?
No. Under N.J.S.A. 54A:5-3, trust income paid or credited to a New Jersey resident beneficiary is taxable to that beneficiary. An ING can only address income the trust keeps and reinvests. If you plan to spend the sale proceeds in New Jersey, the benefit shrinks fast.
When should I set up an ING trust before selling my business?
Well before a letter of intent — often a year or more ahead. The trust must own the interest being sold before the deal is effectively locked in. Trustee selection, situs, and committee design all take time, and late-stage transfers invite challenge. Owners usually model the ING alongside sale structure, QSBS, and installment planning.
This article is general information for New Jersey business owners weighing trust planning before a sale. It is not tax or legal advice and does not create a CPA-client relationship. ING trusts carry unresolved federal and state risks, and rules change — sometimes retroactively. Figures are current as of the date above, sourced to the IRS, the New Jersey Legislature, and New York State. Confirm your specifics with a licensed CPA and trust counsel before you act.