California’s Limit on Tax Break for Trusts Leaves Plenty of Holes (Correct)

California’s attempt to stop wealthy people from using a specific type of out-of-state trust to avoid state income tax may not be working as well as Gov. Gavin Newsom and lawmakers intended.

When the Democratic governor proposed the change last January as part of the state budget, his office said it “mitigates a tax strategy which allows California residents to transfer assets into out-of-state incomplete non-grantor trusts and potentially avoid state taxation.” The trusts at issue are those in which the person establishing the trust—the grantor—relinquishes enough control for the trust to be considered a separate taxpayer for state ...