Do you want to make sure that more of the assets you plan to give to your family – and the income those assets earn – actually gets to them?

Then you might want to take some steps to help ensure that the non-grantor trusts you create pay as little as possible in state income taxes.

One such step could be to reduce, if not eliminate, the trusts’ duty to pay any state income taxes. This feat might be arranged simply by making sure the trustees of your new and/or already established non-grantor trusts reside in the “right” state, or that the trust owns only the “right” kind of assets.

What types of trusts owe state income taxes?

For U.S. income tax purposes, there are two types of trusts: 

  • Grantor trusts – The person who created the trust (i.e., the grantor), or his or her spouse,1 retains sufficient powers over the trust that he or she is deemed to own the assets and therefore must pay any taxes on any income the trust earns and any gains it recognizes. This is the case even if the creator (or grantor) of the trust has forever and irrevocably relinquished the right to benefit from the trust’s assets.2
  • “Non-grantor trusts”– The trust itself is considered the owner of the assets in the trust. Consequently, the trust itself must pay taxes on the income it accumulates and the gains it recognizes. (This type of trust is often created upon the grantor’s death.)

Meanwhile, state tax law governs how much – and even whether – a specific non-grantor trust must pay in taxes to that state.

Yes, it can get complicated

We’re talking about taxes, so of course there are complications:

Management matters

How a trust is managed can make a difference. Non-grantor trusts don’t always owe taxes even when they “live” in a state that generally taxes “resident” non-grantor trusts.

For example, if a trust pays all of its income annually to a beneficiary, its net income could be close to zero. As a result, its state income tax burden could be relatively small. (In that case, the beneficiary would owe tax on the income the trust had earned, based on the beneficiary’s state of residence.)

What’s in the trust matters

Even if a trust “lives” in a state that does not tax income at all, the trust might still owe taxes to another state, one that does tax income.

For instance, if a trust owns real property, or an interest in a “pass-through” entity (such as a partnership) that does business in a state with income taxes, the trust may owe taxes to that state on the income the property or business earns.

Where the beneficiaries live can matter

Some states, such as California, look at the beneficiaries’ residence when determining whether, and to what extent, to tax trust income.

Meanwhile, New York has a “throwback” tax that, in certain circumstances, can subject New York resident beneficiaries to tax on income earned by some non-grantor trusts in earlier years.

You might be able to do something about that tax bill

Sometimes (though certainly not always), all you need to do to reduce or eliminate state-level taxes on non-grantor trust assets is to simply replace all trustee(s) residing in states that have an income tax with trustees (plus any other fiduciaries) with trustees and other fiduciaries who are residents of another state. 

Of course, it is not easy to find capable and trustworthy trustees in any state. That is why many corporate fiduciaries such as J.P. Morgan who can serve as trustees have trust companies in tax-friendly jurisdictions.

For example: Let’s assume Grace,3 a New Jersey resident, at her death funds a $5 million trust for the benefit of her only son, Frank. Grace’s sister, Lily, also a New Jersey resident, is the sole trustee. This trust allows the trustee (Lily) to accumulate or distribute income and principal to the beneficiary (Frank). But Frank is well off and does not need any income from the trust.;

Option 1 – Pay a lot in state taxes Let’s say the trust invests exclusively in a portfolio of publicly traded stocks and bonds and earns $300,000 in taxable income. Lily distributes none of the income to Frank. Result: The trust would owe around $19,000 to New Jersey in income taxes.

Option 2 – Pay no state taxes Let’s take the same scenario but make someone other than Lily trustee. Let the trustee be someone who lives in New York, or J.P. Morgan, which has a trust company in Delaware. The result then would almost surely be that the trust owes no state income taxes—not to New Jersey, and probably not to the state of the trustee’s residence.4

Not for taxes alone

Residence alone should not govern your decisions about who should be the trustee (and other fiduciaries) of the trusts you create. 

Rather, when you pick a trustee, it should be because your answer to this question is “Yes”:

  • Does this person (or professional) have the time, willingness, capabilities and longevity to discharge a trustee’s many and complicated duties over the life of the trust?

If all else is close to equal, you may want to consider choosing a trustee whose mere residence would save the trust, and ultimately your beneficiaries, money.

And if you already have a trust in a high-tax state, that condition almost certainly can be changed. The trustee’s lawyers usually handle the process of changing trustees, which modern trust agreements generally streamline. Of course, the cooperation of the existing trustees in any transition helps. So too would be the cooperation of courts, which would almost always be involved in the succession process for trusts created under the terms of a decedent’s Will.

We can help

All decisions about trustees should be made in consultation with your tax advisors and estate planning lawyers.

Your J.P. Morgan team is available to work closely with them – and you – to help you ensure the choices you make today support the long-term goals you have for yourself and your family.


1.In some circumstances, a third party might be deemed the grantor of a grantor trust—for instance, in the case of a trust under which a beneficiary has power to distribute trust income and principal to himself or herself.
2. Irrevocable grantor trusts are generally seen as excellent tools for preserving family wealth. That’s because grantors, as owners of the assets, must pay any taxes due on trust income. These payments reduce the value of the grantors’ estates. That, in turn, eventually reduces the estate taxes due when the grantors die. Meanwhile, until then, the assets in trust grow undiminished by those tax payments.
3.All case studies are shown for illustrative purposes only, and are hypothetical. Any name referenced is fictional, and may not be representative of other individual experiences. Information is not a guarantee of future results.
4.In making decisions about whether, and in what amounts, distributions should be made to beneficiaries, trustees of non-grantor trusts should also consider the fact that a trust’s accumulated ordinary income in excess of, in 2022, $13,450 would be subject to U.S. income tax at a rate of 37%, whereas the top marginal rate for beneficiaries, whether filing singly or as married filing jointly is well over $500,000. Distribution of some trust income might therefore be advisable to preserve overall family wealth, even if the trust is not subject to state-level income tax and beneficiary is.


This material is for informational purposes only, and may inform you of certain products and services offered by J.P. Morgan’s wealth management businesses, part of JPMorgan Chase & Co. (“JPM”). Products and services described, as well as associated fees, charges and interest rates, are subject to change in accordance with the applicable account agreements and may differ among geographic locations. Not all products and services are offered at all locations. If you are a person with a disability and need additional support accessing this material, please contact your J.P. Morgan team or email us at accessibility.support@jpmorgan.com for assistance. Please read all Important Information.

GENERAL RISKS & CONSIDERATIONS.Any views, strategies or products discussed in this material may not be appropriate for all individuals and are subject to risks. Investors may get back less than they invested, and past performance is not a reliable indicator of future results. Asset allocation/diversification does not guarantee a profit or protect against loss. Nothing in this material should be relied upon in isolation for the purpose of making an investment decision. You are urged to consider carefully whether the services, products, asset classes (e.g. equities, fixed income, alternative investments, commodities, etc.) or strategies discussed are suitable to your needs. You must also consider the objectives, risks, charges, and expenses associated with an investment service, product or strategy prior to making an investment decision. For this and more complete information, including discussion of your goals/situation, contact your J.P. Morgan representative.

NON-RELIANCE. Certain information contained in this material is believed to be reliable; however, JPM does not represent or warrant its accuracy, reliability or completeness, or accept any liability for any loss or damage (whether direct or indirect) arising out of the use of all or any part of this material. No representation or warranty should be made with regard to any computations, graphs, tables, diagrams or commentary in this material, which are provided for illustration/reference purposes only. The views, opinions, estimates and strategies expressed in this material constitute our judgment based on current market conditions and are subject to change without notice. JPM assumes no duty to update any information in this material in the event that such information changes. Views, opinions, estimates and strategies expressed herein may differ from those expressed by other areas of JPM, views expressed for other purposes or in other contexts, and this material should not be regarded as a research report. Any projected results and risks are based solely on hypothetical examples cited, and actual results and risks will vary depending on specific circumstances. Forward-looking statements should not be considered as guarantees or predictions of future events.

Nothing in this document shall be construed as giving rise to any duty of care owed to, or advisory relationship with, you or any third party. Nothing in this document shall be regarded as an offer, solicitation, recommendation or advice (whether financial, accounting, legal, tax or other) given by J.P. Morgan and/or its officers or employees, irrespective of whether or not such communication was given at your request. J.P. Morgan and its affiliates and employees do not provide tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any financial transactions.

Legal Entity and Regulatory Information.

J.P. Morgan Wealth Management is a business of JPMorgan Chase & Co., which offers investment products and services through J.P. Morgan Securities LLC (JPMS), a registered broker-dealer and investment adviser, member FINRA and SIPC. Insurance products are made available through Chase Insurance Agency, Inc. (CIA), a licensed insurance agency, doing business as Chase Insurance Agency Services, Inc. in Florida. Certain custody and other services are provided by JPMorgan Chase Bank, N.A. (JPMCB). JPMS, CIA and JPMCB are affiliated companies under the common control of JPMorgan Chase & Co. Products not available in all states.

Bank deposit accounts and related services, such as checking, savings and bank lending, are offered by JPMorgan Chase Bank, N.A. Member FDIC.

This document may provide information about the brokerage and investment advisory services provided by J.P. Morgan Securities LLC (“JPMS”). The agreements entered into with JPMS, and corresponding disclosures provided with respect to the different products and services provided by JPMS (including our Form ADV disclosure brochure, if and when applicable), contain important information about the capacity in which we will be acting. You should read them all carefully. We encourage clients to speak to their JPMS representative regarding the nature of the products and services and to ask any questions they may have about the difference between brokerage and investment advisory services, including the obligation to disclose conflicts of interests and to act in the best interests of our clients.

J.P. Morgan may hold a position for itself or our other clients which may not be consistent with the information, opinions, estimates, investment strategies or views expressedin this document.  JPMorgan Chase & Co. or its affiliates may hold a position or act as market maker in the financial instruments of any issuer discussed herein or act as an underwriter, placement agent, advisor or lender to such issuer.

Check the background of our firm and investment professionals on FINRA's BrokerCheck

To learn more about J. P. Morgan’s investment business, including our accounts, products and services, as well as our relationship with you, please review our J.P. Morgan Securities LLC Form CRS and Guide to Investment Services and Brokerage Products.

This website is for informational purposes only, and not an offer, recommendation or solicitation of any product, strategy service or transaction. Any views, strategies or products discussed on this site may not be appropriate or suitable for all individuals and are subject to risks. Prior to making any investment or financial decisions, an investor should seek individualized advice from a personal financial, legal, tax and other professional advisors that take into account all of the particular facts and circumstances of an investor's own situation. 

This website provides information about the brokerage and investment advisory services provided by J.P. Morgan Securities LLC ("JPMS"). When JPMS acts as a broker-dealer, a client's relationship with us and our duties to the client will be different in some important ways than a client's relationship with us and our duties to the client when we are acting as an investment advisor. A client should carefully read the agreements and disclosures received (including our Form ADV disclosure brochure, if and when applicable) in connection with our provision of services for important information about the capacity in which we will be acting.


J.P. Morgan Wealth Management is a business of JPMorgan Chase & Co., which offers investment products and services through J.P. Morgan Securities LLC (JPMS), a registered broker-dealer and investment adviser, member FINRA and SIPC Insurance products are made available through Chase Insurance Agency, Inc. (CIA), a licensed insurance agency, doing business as Chase Insurance Agency Services, Inc. in Florida. Certain custody and other services are provided by JPMorgan Chase Bank, N.A. (JPMCB). JPMS, CIA and JPMCB are affiliated companies under the common control of JPMorgan Chase & Co. Products not available in all states.

Please read additional Important Information in conjunction with these pages.