First, for the sake of your readers, we should say that this topic — of trusts and states that serve as trust havens — is purposely complicated. The trust industry hopes you will surrender your power to understand this topic and focus on something else. Trusts are an antiquated ownership structure that have been manipulated and morphed to serve the interests of ultra-wealthy oligarchs and wealth hiders. A whole industry of wealth defense industry enablers has expanded to rework the trust form of property ownership.

For example, the typical trust has three roles: the grantor (the person who establishes the trust and puts assets into it); the beneficiary (the person who will receive the assets or income from the assets); and the trustee, the person designated to implement the grantor’s wishes and act in the interests of the beneficiary. Trust lawyers will invoke the idea of a family with a disabled child establishing a trust for their care after the deaths of the parents. Historically trust law also includes a reform called the “rule against perpetuities” to limit the lifespan of a trust to roughly under a century so that, in the colorful language of property law, the “hand of the dead will not control the living.”

But the wealth defense industry realized that the trust form could thrust an asset into “ownership limbo,” making it hard for, say, tax authorities or an aggrieved customer or divorcing spouse to sue and receive compensation. You can’t tax or sue the grantor as they have given up ownership of the assets and put them in a trust. You can’t tax the beneficiary as they haven’t received the funds. And the trustee is just a functionary — it’s not their wealth.

Behold, the asset isn’t owned by anyone. But what if you manipulate trust law — or as our report shows — you convince a state legislature to morph trust law to allow the same person to be both grantor and beneficiary (aka, “the selfie trust”) or allow a trust to live forever (a “dynasty trust”).

What these states are doing is competing over who will have the most lax rules and standards with regards to the definition of trusts. The three major ingredients they compete over is: secrecy (hiding the identity of the parties), taxation (not taxing the trust), and how long the trust can exist (by repealing the rules that limit the lifespan of a trust). They also compete over who will tolerate strange manipulations of trust law.

Many of the states that have worked to attract trusts and trust companies are smaller states that have historically relied on industry and agriculture. The trust industry has been able to manipulate state legislatures by promising economic development and good jobs. But it’s not as if the trust creators move to the state — and the money in trust does not go to the state. In fact, most trust companies pay very low fees so that they’re handling billions of dollars and paying the state perhaps a couple million. They do provide many jobs — but the price for maybe a few hundred jobs is billions in lost tax revenue for the entire country.

There are some early “trust haven” states that have led the “race to the bottom” in lowering their standards to attract trust business. They are Alaska, Delaware, South Dakota, and Nevada: the trust industry calls them “the big four.” But a number of other states are now in the chase. We identify thirteen leading trust haven states that have changed their laws to accommodate trusts for the extremely wealthy.

We think there is a minimum of $5.6 trillion in trust and estate assets — but this number is probably much higher. There aren’t federal laws or rules requiring state disclosure of trust registration and assets. And some states allow unregulated trust companies, so even states themselves don’t know how much money those companies are dealing with.

While some states disclose to the public how much they regulate in trust assets, it’s not as if there are uniform reporting standards, so it’s tough to truly compare different state numbers. But the leading states typically regulate dozens or hundreds of billions of dollars in trusts. For example, South Dakota reports more than $500 billion and Tennessee reports more than $160 billion. But we can’t know how much money is in Nevada because the state passed a law exempting all financial institution documents from public records.

These trust haven states are one of the major weak links in the global system of financial transparency. This system enables the ultra-wealthy from around the world to sequester wealth out of the reach of taxation and accountability.

The 2021 Pandora Papers revealed the role of the United States as a global tax haven, a destination for oligarchs and wealth hiders from around the world. As you say, the superrich avoid tax in this way and thus contribute to yawning worldwide inequality and ensure that power is concentrated in the hands of wealthy elites.

But we can also think about how individual state residents are affected by a trust industry they likely know little about. The trust industry lobbies for and demands low or no taxes for trusts and the wealthy, therefore many of these states operate without individual or corporate income taxes. Instead, states are run overwhelmingly by sales taxes, which are disproportionately paid by the poor. The resultant inadequate revenue means fewer services for the public. In fact, of the thirteen states we profile, seven are in the bottom eleven in terms of state spending per capita.

While the increase in trust-subservient laws over the past couple of decades certainly helps, the explosion in trust and estate assets really just tracks the explosion of wealth. We saw a surge in wealth (particularly for the people at the top) during the pandemic. Our research at the Institute for Policy Studies shows how US billionaire wealth rose by $1.7 trillion between the start of the pandemic and May 2022 — an increase of more than half. But it’s not just billionaires. Between spring 2020 and the end of 2021, the wealth of the top 1 percent in the United States increased by more than $12 trillion. That’s a marked increase in an already upward trend.

States that host trust industries are unlikely to voluntarily limit their expansion, so some federal action will be required to shut down trust abuse. The wealth defense industry has a strong vested interest in maintaining the status quo while ignoring the harms to state residents. In our report, we propose a series of reforms to trust law and enforcement, which will benefit residents of shadow states as well as people nationwide. In addition to improving enforcement and oversight of trusts, we propose establishing a federal “rule against perpetuities” to limit the life span of trusts. We advocate for registration of trusts, similar to corporations and companies, but with the requirement that all parties (settler, beneficiary, and trustee) be registered. And certain forms of trusts that exist entirely to obfuscate ownership or dodge taxes should be outright banned.