Washington, D.C. – On January 16, The New Yorker published an article exposing how certain Nevada trusts held by the Getty family may have exploited loopholes to dodge hefty tax payments. The article details how an employee was fired for suggesting the trusts should not maintain a fiction that the beneficiaries were not residents of California, allowing them to dodge over $300 million in CA taxes ($100 million from one trust alone).

The article quotes IPS researcher Chuck Collins and IPS Associate Fellow Bob Lord and draws on Collins’ book, The Wealth Hoarders: How Billionaires Pay Millions to Hide Trillions, about the role of wealth advisors in shaping how the U.S. has become a tax haven and a destination for the wealth of oligarchs and money launderers.

In September 2022,  the Institute for Policy Studies released a critical new report, “Billionaire Enabler States: How U.S. States Captured by the Trust Industry Help the World’s Wealthy Hide Their Fortunes“, which highlights the role of a handful of U.S. states as key enablers in an international system of wealth hiding.

Among those states, one of the biggest enablers is Nevada, which, as the report highlights, boasts the distinction of being one of the most trust-subservient jurisdictions in the country. Because it’s also one of the best states to preserve trust secrecy, information about Nevada trusts is notoriously hard to obtain. Some trusts look to Nevada to help the wealthy hide taxes owed to other states. For example, the report notes, “Because Nevada allows unregulated trust companies, while South Dakota does not, the South Dakota Trust Company has a branch in Nevada. So does Alaska’s Peak Trust Company. These are the largest trust companies in their respective states.”

The report identifies 13 U.S. states and exposes how they shield the fortunes of the world’s richest people:

• The Biggest Enablers are Nevada, South Dakota, Alaska, and Delaware, which the report calls “the shadow states in the darkest corners of the wealth management industry.”
• The report names Tennessee, Wyoming, and New Hampshire as Bad Actors that actively aid and abet the wealth defense industry.
• The report identifies Rhode Island, Ohio, Missouri, Illinois, Florida, and Texas as Emerging Enablers that are becoming key tools for trusts to shield hidden wealth.

Key Findings:

• The U.S. is host to an estimated $5.6 trillion in trust and estate assets. Much of these assets belong to the uber-wealthy — both international and domestic — and are held in trust in states subservient to the trust industry. The concept of the “offshore” tax haven has very much washed ashore.
• U.S. trust-subservient states enable illicit wealth hiding and tax avoidance. As the International Consortium of Investigative Journalists’ Pandora Papers investigation revealed, some U.S. states have aided international kleptocrats to avoid accountability at home and hide their ill-gotten wealth abroad. These states also enable wealthy Americans to avoid federal taxation, cheating the U.S. out of revenue with which it could combat poverty or invest in infrastructure. Trusts, therefore, affect every U.S. citizen and resident.
• Three key ingredients — low or no taxes, secrecy, and trust longevity — make certain U.S. states particularly attractive to wealth defenders. These states pass laws to cut or abolish taxes or hide trust records from prying eyes. More than two thirds of states allow trusts to last for at least 150 years or forever. Additionally, more than a third of states allow trusts to be established by the person benefiting from the trust, shielding their assets from creditors and tax authorities.
• There is a significant correlation between regressive state taxation systems, which hurt the poorest residents, and trust-subservient state laws. Of the 13 states captured by the trust industry we have profiled here, eight are among the 15 most regressive tax states in the country. These states often cut taxes for the wealthiest residents and instead rely on the low and middle class, who pay a disproportionate amount of their income in taxes.
• The trust industry says it simply helps its clients obey laws — but in reality it often writes the laws. As our report shows, the trust industry is the driving force for trust deregulation. Trust and estate lawyers regularly lobby state legislatures and sometimes work in official capacities with states to write legislation favorable to the industry. In small states with part-time or “citizen” legislatures, there is no countervailing power that matches the clout of the financial services industry. And this trust deregulation is often bipartisan.
• The trust industry offers little benefit to states. Contrary to what trust and estate lawyers may claim about increased economic development and boosted state revenue, states largely do not benefit from trusts. Though billions may be held in trust in a state, state coffers — and the public — will never see it. States charge only small fees to trust companies; the trust industry creates very few jobs; and trust owners have no reason to physically move to or even visit the states where they have established trusts.
• States are engaged in a rapid race to the bottom, so federal action is needed. States may see a few jobs created by the trust industry and determine that is worth the detrimental effect of trusts on the rest of the country. It is in the federal government’s interest, therefore, to curb state laws that enable illicit wealth hiding and tax avoidance.

“What little we know about the hidden wealth system comes from leaks and disclosures by courageous whistleblowers, like Marlena Sonn,” said Chuck Collins, director of the Program on Inequality and the Common Good and co-editor of Inequality.org.  “Federal lawmakers need to reform trust law and shut down abuses so Nevada isn’t allowed to pick California’s pocket.”

“The Getty story is yet another example of a trust-subservient state bilking the rest of the country—and another example we’ve only heard about because legal proceedings pierced the veil of secrecy,” said Kalena Thomhave, co-author of the Billionaire Enabler States report and a researcher with IPS. “Nevada has helped make it possible for super-wealthy families like the Gettys to dodge taxes owed to other states like California.”

Read the full report and a summary of key findings.

Read an additional analysis of dynasty-building trusts by Chuck Collins.

For more information and to speak with Chuck Collins and Kalena Thomhave, contact IPS’s Media Manager Olivia Alperstein at (202) 704-9011 or olivia@ips-dc.org. 

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About the Institute for Policy Studies

For nearly six decades, the Institute for Policy Studies has provided critical research support for major social movements and progressive leaders inside and outside government and on the ground around the United States and the world. As the United States’ oldest progressive multi-issue think tank, IPS turns bold ideas into action through public scholarship and mentorship of the next generation of progressive scholars and activists.