North Carolina Department of Revenue v. The Kimberly Rice Kaestner 1992 Family Trust

Summarized by:

  • Court: U.S. Supreme Court Certiorari Granted
  • Area(s) of Law: Trusts and Estates
  • Date Filed: January 11, 2019
  • Case #: 18-457
  • Judge(s)/Court Below: 814 S.E.2d 43 (N.C. 2018)
  • Full Text Opinion

Whether the Due Process Clause prohibits states from taxing trusts based on trust beneficiaries’ in-state residency?

This case centers on the unique nature of trusts as an arrangement between a settlor, trustee and the beneficiaries.  With respect to trust taxation, five of nine states that have addressed this question have concluded that the Due Process Clause forbids taxes “based on trust beneficiaries’ in-state residency.”  The Respondent family trust has $13 million in assets and has paid $1.28 million in taxes due to a North Carolina statute that assesses taxes for in-state beneficiaries.  The trust challenged this statute under the Due Process Clause, arguing that the trust’s location does not rests with the beneficiaries and both are separate entities.  That means that if the trust has no connection or contacts with a state, it is not subject to that state’s taxation requirements.  The North Carolina Supreme Court agreed and held that the statute violated the Due Process Clause.  Here, Petitioner urges the United States Supreme Court to reverse the North Carolina Supreme Court to resolve a split among the states that have addressed this issue.  Further, Petitioner requests that the Court address the underlying federalism implications of the court’s purported intrusion into the state’s ability to assess taxes. 


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