State Tax Snapshot: Identifying Nexus Creating Activities for Trusts


 

A trust with a resident trustor (i.e., the person who created the trust) would, by itself, create sufficient nexus to subject a trust to an income-based tax or filing requirement in 62 percent of the states in the U.S., according to the preliminary results of a survey recently conducted by Bloomberg BNA. (For the states that did not respond to the survey, BBNA supplied the state's answer based on the jurisdiction's laws).

Nearly all of the states said they would find nexus based on the residence of the creator of a testamentary trust. The sole exception was Kansas.

Almost all of the states identified factors that would subject an intervivos trust to their jurisdiction's tax. Specifically, nexus would result in:

  • 15 states if created by a resident at the time of creation
  • 14 states if funded by a resident at creation
  • 13 states if created by a current resident
  • 11 states if funded by a current resident
  • 16 states if an intervivos revocable trust was created and funded by a resident at creation, but is not yet revocable

Maryland was the only state that said it would not find nexus for an intervivos trust solely because it was funded or created by a resident.

These and other findings will be incorporated into the Trust Nexus Evaluator, which is set for release in late August.

By Steven Roll

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