Investment Updates
Spelling Out Rules For DINGs, WINGs, And NINGs
Published Tuesday, February 11, 2014 at: 7:00 AM EST
It’s bad enough that you may have to contend with higher federal tax rates plus a new Medicare surtax. To compound the tax woes of upper-income investors, California, New York, and other states also impose a heavy state income tax burden. One way to mitigate the impact is through a nongrantor trust—and there are several kinds to consider. Options include three choices with rather distinctive acronyms: Delaware Incomplete gift Nongrantor Trusts (DINGs), Wyoming Incomplete gift Nongrantor Trusts (WINGs), and Nevada Incomplete gift Nongrantor Trusts (NINGs).
Under the American Taxpayer Relief Act of 2012 (ATRA), the top federal income tax rate increased from 35% to 39.6%, and ATRA also raised the maximum tax rate on long-term capital gains and qualified dividends from 15% to 20% for investors in the regular 39.6% tax bracket. Those higher tax rates also apply to trusts that generate income above a relatively low dollar threshold.
There’s now also a 3.8% surtax that applies to the lesser of your “net investment income” (NII) or the amount by which your modified adjusted gross income (MAGI) exceeds $200,000 for single filers and $250,000 for joint filers. The surtax also affects trusts with income above the top dollar threshold.
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