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Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills.
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letsgobobby
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Post by letsgobobby »

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bsteiner
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Re: Corporate co-trustee and state taxation

Post by bsteiner »

Some states treat a trust as a resident trust for income tax purposes if the grantor or testator is or was domiciled in that state. Other states treat a trust as a resident trust for income tax purposes if the trustees are in that state, or if a trustee is in that state, or if the trust is administered in that state. There are other variations.

Pennsylvania treats a trust as a resident trust if the grantor or testator is or was domiciled in Pennsylvania. Pennsylvania Code Title 61, § 101.1, provides in relevant part as follows:

Resident trust—The single controlling factor in determining if a trust is a resident trust for purposes of this article shall be whether the decedent, the person creating the trust or the person transferring the property was a resident individual or person at the time of death, creation of the trust or the transfer of the property. The residence of the fiduciary and the beneficiaries of the trust shall be immaterial. A resident trust shall be one of the following:

(i) A trust created by the will of an individual who at the time of his death was a resident individual.

(ii) A trust created by a person who at the time of the creation was a resident.

(iii) A trust consisting in whole or in part of property transferred to the trust by a person who at the time of the transfer was a resident.

http://www.pacode.com/secure/data/061/c ... 01toc.html

So if you're not a Pennsylvania resident, then Pennsylvania won't tax a trust that you create (except on any Pennsylvania source income) even if the trustee is in Pennsylvania.

In a recent case, McNeil Trust v. Commonwealth, 67 A.3d 185 (2013), the Commonwealth Court (the intermediate appellate court) held that Pennsylvania couldn't tax a resident trust (a trust created by a Pennsylvania resident) during lifetime where there was no ongoing connection to Pennsylvania. http://scholar.google.com/scholar_case? ... _sdt=4,229.
Topic Author
letsgobobby
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Re: Corporate co-trustee and state taxation

Post by letsgobobby »

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Last edited by letsgobobby on Sat Nov 09, 2019 11:20 pm, edited 1 time in total.
bsteiner
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Joined: Sat Oct 20, 2012 9:39 pm
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Re: Corporate co-trustee and state taxation

Post by bsteiner »

I didn't notice the reference in your post to the Pennsylvania inheritance tax. The Pennsylvania inheritance tax only applies to Pennsylvania residents and nonresidents owning property in Pennsylvania at the time of death (and certain transfers within a year of death). Naming a Pennsylvania resident trustee in your Will won't cause your estate to be subject to Pennsylvania inheritance tax if you're not a Pennsylvania resident and you don't have any property in Pennsylvania or transfer any property in Pennsylvania within a year of death.
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