With the disparity in tax consequences that can attach to a trust depending on the state tax laws that apply to the trust, it is not safe for a trustee to ignore the tax impacts of its increasingly mobile beneficiaries, or for the trustee to blindly adhere to the status quo. This presentation is aimed at providing a map to navigate the state income tax rules.

How do you know what to look for when navigating the often murky waters of state income taxation of trusts? The first goal of this presentation is to provide the knowledge to enable the audience to recognize the trust attributes and jurisdiction connections that can result in state taxation of a trust. We will identify the various ways a trust can be or become subject to income taxation by a given state, and how best to avoid the adverse taxation.

What do you do once you know your trust is subject to tax in a high taxing jurisdiction? The second goal of this presentation is to provide some methods to reduce or avoid the tax, including constitutional challenges to overreaching tax law, moving trusts to more favorable taxing jurisdictions, modifying the terms of trusts to minimize taxation, and exploring grantor and nongrantor trust solutions.