State taxation of trusts curtailed

The U.S. Supreme Court has affirmed that a state cannot impose an income tax on the worldwide income of a trust based only upon the fact that a contingent beneficiary resides in the state.

Good news for trust administrators everywhere.  The notion that beneficiary residency alone creates enough nexus for income taxation was a minority rule, and now it has been laid to rest.  However, given the unquenchable thirst for tax revenue, issues of the income taxation of trusts will rise again.