On June 21, 2019, the Supreme Court has issued its opinion in North Carolina Dept. Rev. V. Kaestner 1992 Family Trust, 588 U.S. ___ (2019). The Supreme Court held that “The presence of in-state beneficiaries alone does not empower a State to tax trust income that has not been distributed to the beneficiaries where the beneficiaries have no right to demand that income and are uncertain to receive it.”
In applying these principals to trust beneficiaries, the residence of a trust beneficiary in NC by itself does not supply the minimum connections necessary to sustain the State’s tax. If the only connection to NC is that the discretionary beneficiary is a NC resident this will not cause the trust to be taxed in NC.
