Tuesday, January 22, 2019
The highest court of the country has granted certiorari to a tax case that has serious implications for states and trusts beneficiaries. The issue within North Carolina Department of Revenue v. the Kimberley Rice Kaestner 1992 Family Trust is: Does the due process clause prohibit states from taxing trusts based on trust beneficiaries’ in-state residency?
The ongoing controversy can be seen as premier matter concerning estate planning. Steve Akers, an estate lawyer with Bessemer Trust, posed the question a different way at the Heckerling conference: “Can a state tax a trust located in another state? What are minimum contacts?” The split among the states is close: five states say no, four states say yes.
Almost every state taxes trust income, and 11 of them tax trusts based on trust beneficiaries in-state residency - including Minnesota and North Carolina that have had cases decided in their supreme courts within the last year. A great number of trusts are awaiting the outcome of this decision by the United States Supreme Court.
See Ashlea Ebeling, U.S. Supreme Court to Hear Key Income Tax Issue for $120 Billion Trust Industry, Forbes, January 16, 2019.
Special thanks to Paul M. Cathcart (Hemenway & Barnes, LLP, Boston, MA) for bringing this article to my attention.
Special thanks to Joel C. Dobris (Professor of Law, UC Davis School of Law) for bringing this article to my attention.