Key Takeaways
Trust taxation insights:- Nexus Requirement: States must have a significant and existing nexus with a trust to tax it constitutionally, challenging historical practices.
- Migrating Trusts: Strategies for trust migration can influence state tax implications, emphasizing the importance of jurisdiction selection.
- Role Residencies: The residency of trustees and beneficiaries significantly impacts a trust’s taxability, underlining the value of expert estate planning.
When are states permitted to tax undistributed trust income?
As I am researching another precedent-setting trust case for an upcoming virtual continuing education panelist discussion for IICLE (Illinois Institute for Continuing Education), it’s hard to ignore the trend we see regarding trust taxation.
In 2018, we closely followed the Fielding case’s trajectory with our business development director and company president. We watched as Fielding won in Minnesota’s Supreme Court and as the case landed on the steps of the Supreme Court of the United States.
Also, on the SCOTUS steps at the time was the Kaestner case out of North Carolina. As many of us are very aware, SCOTUS denied hearing Fielding but argued Kaestner, and the rest is history.