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Katya Sverdlov Blog

Tuesday, May 5, 2015

When does a Trust need to pay New York State income taxes?

Resident Trust: In general, a Trust is considered a Resident Trust and the Trustee must file New York State income tax, if the Trust was created by a New York State Testator or Grantor. What that means is if the property was being transferred to a Trust from a person who was domiciled in New York State, then the Trust is a Resident Trust and will be taxed according to New York State rules.

Exempt Resident Trust Exemption. New York will not tax the income from the Resident Trust if, during a particular year, it had no New York State domiciled trustees, the entire corpus of the Trust was located outside of New York and all income and gains of the trust were derived from sources outside of the State of New York. Thus, if the Trust has only intangible assets, such as stocks and bonds, and all the Trustees are domiciled outside of New York, the Trust will meet the exemption and will not be taxed based on New York State rules.

New York beneficiaries exemption . Unfortunately, even if the Trust qualifies for an exemption, all distributions from the Trust to New York resident beneficiaries will be taxed by the New York State. This tax can be avoided by either not distributing money from the Trust, or distributing money to other beneficiaries who are not New York residents.

Disclaimer: This article only offers general information.  Each situation is unique. It is always helpful to talk to a specialized attorney, to figure out your various options and ramifications of actions.  As every case has subtle differences, please do not use this article for legal advice. Only a signed engagement letter will create an attorney-client relationship.

 


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