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Expert tells Ways & Means committee trusts can be used to sidestep Vermont income and estate taxes; committee urged to study fix
Summary
Professor Brian Galli told the House Ways and Means Committee that a drafting gap in Vermont’s resident‑trust rules could let wealthy residents shift income and capital gains to out‑of‑state trusts and avoid Vermont income and estate taxes; he recommended a narrow statutory change and suggested the Department of Taxes study the scale of any loss.
Professor Brian Galli, a law professor at the University of California, Berkeley, told the House Ways and Means Committee on April 14 that trusts can be structured so wealthy Vermont residents avoid paying state income and estate taxes.
"It would be possible for wealthy individuals in Vermont to pay essentially no income tax and essentially no estate tax," Galli said, summarizing the planning techniques he described to lawmakers. He explained that because a trust is a separate taxpayer and can be governed by laws of another state, taxpayers can route income and appreciated assets into trusts governed by zero‑income‑tax jurisdictions while still living in Vermont.
Galli told committee members the primary concern for the state budget is an income‑tax strategy that moves income streams out of Vermont to jurisdictions with no income tax. He…
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