Incomplete Gift Nongrantor Trust (ING Trust): Definition and How It Works in California

By Eric Ridley, attorney, Ridley Law. Updated October 2026.

An incomplete gift nongrantor trust (ING trust) is a nongrantor trust funded without a completed gift, so it pays its own income tax and uses no gift exemption. For tax years beginning on or after January 1, 2023, California taxes ING trust income to the grantor anyway.

How it works in California

Ridley Law’s guide to ING trusts in California has more. On the federal side, a transfer is an incomplete gift when the donor keeps a power over who receives the property (Treas. Reg. § 25.2511-2(b)), and the trust is drafted to avoid every grantor trust trigger, usually by giving distribution decisions to a committee. The appeal for Californians was a trust administered outside California, whose income from sources outside California the state couldn’t reach under the residency rules in Rev. & Tax. Code, § 17742.

Rev. & Tax. Code, § 17082 ended that for taxable years beginning on or after January 1, 2023. It includes an ING trust’s income in the grantor’s gross income as if the whole trust were a grantor trust. The exception is narrow. The trustee must elect on a timely original California fiduciary return to be taxed as a resident nongrantor trust, and 90 percent or more of the trust’s distributable net income must go to charity.

Why it matters

A California resident who sets up an ING trust today gets no California income tax benefit from it, and a Californian with an older ING trust is now taxed on its income as if it were a grantor trust. Those trusts need a review of whether to keep, decant or unwind them, and of the federal consequences of each choice.

Common mistakes

Assuming a trust created before 2023 is grandfathered. Section 17082 applies by taxable year, with no exception for older trusts. Relying on promotional material written before the change. And forgetting that the trust still has to file its own federal return as a nongrantor trust.

Related terms

• Intentionally Defective Grantor Trust (IDGT): the opposite design: a completed gift to a trust that is a grantor trust for income tax.
• Qualified Small Business Stock (QSBS): ING trusts were sometimes paired with QSBS stacking, which California doesn’t recognize.
• Grantor Trust: California now treats ING trusts as grantor trusts for state income tax.

Part of the California estate planning glossary. For the full treatment, see ING trusts in California.