Many Colorado residents work with estate planning attorneys to device ways to protect their wealth for future generations and to avoid the costly process of probate. There are a number of different testamentary tools that can be used to achieve these goals, and trusts are often implemented to support estate planners’ needs. Not long ago the United States Supreme Court decided to take on a trust-related case, and its decision on the matter may have major implications for how financially useful trusts are to estate planners.
As the law stands, a trust cannot be taxed by a state unless it has a sufficiently close relationship to that state. The case at issue arose when the state of North Carolina taxed a New York trust over $1 million over the course of several years. No distributions were paid out of the trust and the trust was created in New York; its only connection to North Carolina was that a beneficiary lived in that state.
The family of the beneficiary sued to recover the taxes that the state of North Carolina imposed on the trust and how the United States Supreme Court will decide if the state’s actions were permissible under the law. If the Supreme Court finds that North Carolina’s actions were permissible, trusts across the country may be subject to taxation by the states in new and costly ways.
It is always a good idea for individuals to discuss changes in the laws with their estate planning attorneys. These professionals can advise them if court decisions and legal changes will impact the ways that their estates are assessed, taxed, and distributed to their beneficiaries.