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Settlor’s Residency at Trust Creation Not Sufficient to Subject Trust to Pennsylvania Income Taxation Under Commerce Clause

176961933Another recent court decision has looked at the constitutionality of the State imposing state income tax on an irrevocable trust. Last year, the Court in McNeil v. Commonwealth of Pennsylvania held that Pennsylvania’s attempt to tax the McNeil trusts, whose connection to Pennsylvania was (1) the residency of the settlor at the time the trust was created and (2) the residency of the trust’s discretionary beneficiaries was an unconstitutional violation of the Commerce Clause of the United States Constitution.

Illinois Income Taxation of Trusts: Minimum Contacts Besides Settlor’s Residency at Trust Creation Required

453118507Last week, we discussed the important issue that settlors, beneficiaries, and trustees of a trust should be thinking about—Do You Know Which States Are Trying to Tax Your Trust?  Two states’ courts have recently looked at what constitutes sufficient minimum contacts to subject a trust to the State’s income tax laws.  In this blog, we will discuss Illinois’ decision in Linn v. Dep’t of Revenue.  Come back next week for our discussion of Pennsylvania’s decision in McNeil v. Commonwealth of Pennsylvania.

Do You Know Which States are Trying to Tax Your Trust?

451594605In an environment in which states are continuously searching for methods of increasing tax revenues, a major consideration for any settlor, beneficiary or trustee of a trust should be where the trust might be subject to income tax. The days of a trust being taxed in the state where it has its “principal place of administration” are quickly fading, as we enter into a new era in which states are increasing attempting to tax trusts with minimal contacts to the jurisdiction.

New York Budget Bill Makes Changes to Trust Income Tax

New York Budget Bill Makes Changes to Trust Income Tax

April 16, 2014

Authored by: Stacie J. Rottenstreich and Karin Barkhorn

The New York Budget bill made changes not only in the estate tax arena, as previously reported on this blog, but also to the income taxation of certain trusts.

Under law prior to the passage of the Budget bill, a resident trust created by a New Yorker was entirely exempt from New York income tax if there was (i) no New York resident trustee, (ii) no assets located in New York and (iii) no New York source income. The new law, effective for calendar years beginning January 1, 2014, provides that a New York resident beneficiary receiving a distribution of income from a New York State resident trust which is exempt from New York State income tax, will be taxed on that “accumulated distribution”. The new accumulation distribution tax, will not apply if the accumulated income was earned before 2014 or if the trust itself is subject to New

New York Budget Bill Makes Changes to Estate Tax

New York Budget Bill Makes Changes to Estate Tax

April 8, 2014

Authored by: Stacie J. Rottenstreich and Karin Barkhorn

statuteoflibertyAs previously reported on this blog, Governor Cuomo and the New York State legislature, both Assembly and Senate, were busy at work on the budget which contained modifications for the trusts and estates arena. A bill has finally been passed, which looks different from some of the earlier proposals. The new bill impacts the estate and trust world as follows:

Basic Estate Tax Exclusion Amount increases are to be phased in as follows for New York residents or non-residents owning real property located in New York State during the period listed:

 

 

 

  • April 1, 2014 – March 31, 2015 – $2,062,500;
  • April 1, 2015 – March 31, 2016 – $3,125,000;
  • April 1. 2016 – March 31, 2017 – $4,187,500;
  • April 1, 2017 – December 31, 2018 –

Madness in March?

Madness in March?

March 14, 2014

Authored by: Stacie J. Rottenstreich and Karin Barkhorn

The term March Madness may take on new significance to New Yorkers this year. In addition to contributing to NCAA pools, New Yorkers should consider making gifts this month. Following up on prior blog post, New Yorkers may have a very small window of opportunity to take advantage of gifting significant sums of money prior to April 1, 2014. Currently New York State has no gift tax. New Yorkers can make gifts of any size to anyone without incurring any New York gift tax consequences at all. However, the gift and estate tax rules may change shortly. Governor Cuomo has proposed a change to New York’s estate and gift tax law that will require all taxable gifts made by a New York resident after March 31, 2014 to be included as part of the gross estate for purposes of calculating the New York estate tax. However, the proposal would

Guardianship for Alcoholics

Guardianship for Alcoholics

March 3, 2014

Authored by: Luke Lantta

Originally posted on bryancavefiduciarylitigation.com

Knowing when to initiate guardianship proceedings for a loved one can be a difficult and personal decision.  When it comes to substance abuse, those proceedings can enter a grayer area than proceedings involving dementia, injury, or developmental disability.  At what point is an addict or alcoholic incapacitated?  What happens during moments of sobriety?  In In re Guardianship of Esterly (unpublished), the Court of Appeals of Minnesota dealt with some of these difficult questions.

Boone County Treasurer Recognizes Same-Sex Marriage

Boone County Treasurer Recognizes Same-Sex Marriage

February 27, 2014

Authored by: Stephanie Moll and Alan Singer

With drafting assistance provided by our extern from Washington University School of Law, Rachael Lynch.

According to the Columbia Daily Tribune, effective immediately, same-sex marriages will be recognized in Boone County, Missouri for purposes of collecting unclaimed property.  This means that same-sex spouses legally married in a state other than Missouri (Missouri’s Constitution currently bans same-sex marriage) may have a right to some of the almost $68,000 held by the county.  Boone County Treasurer, Nicole Galloway, announced that this transition was merely an extension of the full-faith and credit that her office gives to legal documents from every state (and follows Missouri Governor Jay Nixon’s executive order that Missouri would recognize jointly filed income tax returns from legally-married same sex couples who file jointly for federal purposes).

Missouri Court Upholds Trust—Farm Remains in Family

Maintaining property in a family for generations to come can be tricky.  As the parties in Hoefer v. Musser found out, the intention of a decedent speaks volumes and can overcome procedural deficiencies such as an improper recording of a warranty deed.  In Hoefer, the Missouri Court of Appeals (Southern Division) recently held in favor of a decedent’s wishes to keep a farm in his family for “generations and generations.”  See Hoefer v. Musser, No. SD 32576, 2013 WL 6800823 (Mo. App. S.D. Dec. 23, 2013).

In Hoefer, the decedent’s nephew (Hoefer) was appointed as successor trustee to decedent’s irrevocable trust—the “Vineyard Dwain Hoefer Trust,” created during Hoefer’s lifetime.  Musser, the decedent’s niece, was appointed as personal representative to Hoefer’s estate.  The trust’s only asset was the decedent’s farm, which he intended to keep in his family for as long as possible by granting the

Proposals to Change New York State Transfer Tax System

Proposals to Change New York State Transfer Tax System

January 13, 2014

Authored by: Stacie J. Rottenstreich and Karin Barkhorn

There is has been much talk recently about changing the New York State estate and gift tax structure. Currently, New York State estate tax is based on Federal law from 1998.  New York State imposes a state estate tax on estates valued at $1M. Just this week Governor Cuomo proposed increasing the estate tax threshold from the current $1M to $5.25M and lowering the top estate tax rate to 10% over the next four years. His hope would be that beginning in 2019, the New York State estate tax exemption would equal the Federal exemption, which is indexed to inflation.  This plan would ultimately exempt nearly 90% of estates from New York state estate tax and would eliminate any incentive for New Yorkers to move out of state and migrate to states with no estate tax imposed on its residents.

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