On June 21st, the Supreme Court of the United States entered its opinion in North Carolina v. Kaestner, 588 US (2019). The Kaestner case represents an extremely important decision for all estate planners, trust officers, trustees, and advisers. Although the holding is a narrow one, it is vitally important. The Supreme Court held that a state may not impose income tax on undistributed income of a trust where the trust’s only contact with the state is a beneficiary living in the state, who might have received (but did not actually receive) distributions from the trust.
The entire decision needs to be considered in planning and in trust administration. For example, the court hints that perhaps even holding meetings in a state might provide a sufficient connection to allow the state to impose state income tax on a trust. Three leading experts, Jonathan Blattmachr, Mitchell Gans, and Martin Shenkman will discuss the Kaestner opinion and provide explicit recommendations on structuring and administering trusts to avoid state tax on trust income. Mitchell and Jonathan were two of the authors of the ACTEC amicus brief submitted to the Supreme Court on which the court seems to have relied in forming its opinion.