Estate Planning Changes in Alaska
“Alaskan Trusts” have been favored Estate Tax Vehicles due to Alaska’s asset protection laws, flexible Trust Laws and there being no State Income Tax. This could all change.
However, there is an Alaska State House Bill seeking to impose income tax as Alaska’s economy has tanked. Much of the oil boom in Alaska has dropped and there is a large budget deficit. Therefore, the State is seeking to impose an income tax for the first time in over thirty years.
The Alaska Tax Bill being considered will impose an income tax that includes Alaskan Trusts. This will impose an income tax on even non-resident individuals with income from a source in Alaska. Income from a source in Alaska will include income distributed from a Trust established and governed by the laws of Alaska.
Trusts administered in Alaska will be subject to income tax if this bill is passed. If the income is not distributed to the beneficiary, the Trust will pay the tax on the income. If the income is distributed to the beneficiary, even a non-resident, that beneficiary will be subject to Alaska Income Tax on that income. Regardless of the beneficiary’s state of residence, they will have a tax liability and income tax return filing requirements in Alaska. This would be a bad result for the many Alaskan Trusts that have been established over the years.
Alaska’s possible imposition of an income tax on Trusts and non-resident beneficiaries is likely to have a chilling effect on Alaskan Trusts. Hopefully, this income tax bill will not be passed. If it does pass, Alaska will no longer be a Tax Haven State.
Nevada and South Dakota will continue to be the desired non-residential States for Trusts as they still have favorable Trust Laws, favorable Asset Protection laws, and do not have a State Income Tax.
At the Law Firm of Steven Andrew Jackson, Attorney and Counsellor at Law, we have helped hundreds of families protect themselves and their loved ones, avoid Estate Taxes and Probate Costs, and keep their Estate Plans current with the law through The Customized Protective Estate Planning Solution™.