North Carolina Dept. of Revenue v. Kimberley Rice Kaestner 1992 Family Trust
In a unanimous decision, the U.S. Supreme Court ruled in North Carolina Dept of Revenue v. Kimberley Rice Kaestner 1992 Family Trust that a North Carolina law taxing a New York trust created by a New York settler, solely based on the residency of the beneficiaries, violated the Due Process Clause of the U.S. Constitution and, therefore, was unconstitutional as applied.
The taxation of trusts is increasingly becoming the subject of litigation as states face constant pressure to generate new revenue streams. States look to tax trusts based upon a variety of factors, including the residency of the trustee, where the trust is administered, whether the trust was created by the Will of a resident, whether an inter vivos trust was created by a resident, and whether a noncontingent beneficiary resides in the state, or a combination of these things. The U.S. Supreme Court recently decided a case in which a state sought to tax an out-of-state trust based solely on the fact that a beneficiary resided in the state. Learn more about this ruling in our special report Trust Nexus North Carolina Dept. of Revenue v. Kimberley Rice Kaestner 1992 Family Trust.