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State Trust Nexus Criteria

A comprehensive, static guide to state income tax filing requirements for trusts.

 

Key Concepts in Trust Taxation

This section provides an overview of what “nexus” means, the critical differences between trust types, and the key factors states use to assert their right to tax, all presented in a static, easy-to-read format.

What is Nexus?

Nexus is the minimum connection a trust must have with a state for that state to legally impose a tax. It is the basis for determining a trust’s filing and tax liability in a given state.

Grantor vs. Non-Grantor

Grantor Trusts: Disregarded for tax purposes. Income is taxed to the grantor in their state of residence.
Non-Grantor Trusts: Separate taxable entities. Subject to a complex web of state-specific nexus rules.

Primary Nexus Factors

States typically look at a “bundle of contacts,” including the settlor’s domicile, trustee’s residence, place of administration, and location of trust assets to determine if a non-grantor trust is a “resident” for tax purposes.

The Kaestner Decision

The 2019 Supreme Court case ruled that a state cannot tax a trust based *solely* on a beneficiary’s in-state residence if the beneficiary has no right to, and receives no, trust income. It reinforced that the trust’s own connections matter.

State-by-State Nexus Criteria

This table provides a high-level overview of the tax nexus rules for trusts in all 50 states and Washington D.C. Note that while this is a simplified view, it is a great starting point for understanding the core factors that apply in each jurisdiction.

State Income Tax Imposed? Primary Nexus Factors Specific Nuances/Notes
Alabama Yes Settlor Domicile, Trustee Residence, Place of Administration, Beneficiary Residence Resident trusts report all income. Non-resident trusts taxed on AL-sourced income.
Alaska No N/A No state income, dividend, interest, or capital gains taxes on trusts.
Arizona Yes Trustee Residence, Place of Administration No tax on trusts from non-resident settlors even with resident trustees (except for income from AZ land).
Arkansas Yes General Resident Definition Resident trusts taxed on entire income. Non-residents taxed on AR-sourced income.
California Yes Trustee Residence, Beneficiary Residence, Situs of Assets Nexus if a trustee OR a non-contingent beneficiary is a CA resident.
Colorado Yes Place of Administration A trust is resident if it is administered in Colorado.
Connecticut Yes Settlor Domicile Residency based on settlor’s domicile when trust became irrevocable.
Delaware Yes Settlor Domicile, Trustee Residence Most statutory trusts formed in DE are not subject to DE income tax.
District of Columbia Yes Settlor Domicile, Place of Administration Resident if creator was domiciled in DC at creation.
Florida No N/A No state income tax on trusts. Intangible personal property tax was repealed.
Georgia Yes Beneficiary Residence, Place of Administration Historically used beneficiary residence as a primary factor.
Hawaii Yes Trustee Residence, Place of Administration Resident if all fiduciaries are residents or administration is wholly in HI.
Idaho Yes Multi-Factor Test (3 of 5) Requires 3 of 5 factors for residency: settlor, trustee, admin, governing law, asset situs.
Illinois Yes Settlor Domicile, Place of Administration Courts have pushed back on using settlor’s domicile as the sole factor.
Indiana Yes General Resident Definition Resident trusts must file if gross income is $600+.
Iowa Yes Physical Presence, Economic Presence Nexus can be established by physical or economic presence.
Kansas Yes Place of Administration A “Resident estate or trust” is one administered in Kansas.
Kentucky Yes General Resident Definition Fiduciary tax is due on income not distributable to beneficiaries.
Louisiana Yes Settlor Domicile, Governing Law, Place of Administration Resident if created by will of LA decedent, governed by LA law, or administered in LA.
Maine Yes Settlor Domicile Resident testamentary trust if created by will of decedent domiciled in ME at death.
Maryland Yes Settlor Domicile, Place of Administration Resident if creator is a current MD resident OR trust is principally administered in MD.
Massachusetts Yes Settlor Domicile, Trustee Residence, Beneficiary Residence Complex rules. Requires a MA trustee AND a MA resident grantor at creation for inter vivos trusts.
Michigan Yes Settlor Domicile Resident if created by will of MI decedent or by MI domiciliary when trust became irrevocable.
Minnesota Yes Settlor Domicile, Place of Administration, Trustee Residence, Beneficiary Residence, Situs of Assets Uses a “minimum connections” test post-Fielding case, considering multiple factors.
Mississippi Yes Place of Administration Resident trust is any trust administered by the trustee in MS.
Missouri Yes General Resident Definition A resident trust is one required to file a federal Form 1041.
Montana Yes Settlor Domicile, Trustee Residence, Beneficiary Residence, Situs of Assets, Place of Administration Considers a broad range of factors.
Nebraska Yes General Resident Definition Resident trusts taxed as a percentage of federal taxable income.
Nevada No N/A No state income tax on trusts. Favorable jurisdiction for trust administration.
New Hampshire No N/A No state income tax on trusts, but may have a Business Profits Tax.
New Jersey Yes Settlor Domicile Has an “exempt resident trust” concept which can avoid tax but not filing.
New Mexico Yes Trustee Residence, Place of Administration Trust is domiciled in NM if a trustee is a resident or it’s administered in NM.
New York Yes Settlor Domicile Similar to NJ, has an “exempt resident trust” concept.
North Carolina Yes Beneficiary Residence The landmark Kaestner case originated here, limiting taxation based solely on beneficiary residence.
North Dakota Yes Beneficiary Residence Tax is imposed if one or more beneficiaries are residents.
Ohio Yes Settlor Domicile Trust “resides in Ohio” if assets transferred by a person domiciled in OH.
Oklahoma Yes General Resident Definition Withholding is required on distributions of OK-source income.
Oregon Yes Trustee Residence, Place of Administration A trust is resident if a fiduciary is an OR resident or it is administered in OR.
Pennsylvania Yes Settlor Domicile The single controlling factor for resident trust status is the residency of the creator.
Rhode Island Yes Settlor Domicile, Beneficiary Residence Residency based on settlor’s domicile, but also considers residency of beneficiaries.
South Carolina Yes Place of Administration A resident trust is a trust administered in SC.
South Dakota No N/A Pure no-income-tax state for trusts. A leading jurisdiction for trust situs.
Tennessee No N/A No general state income tax on trusts, but a Franchise & Excise Tax can apply.
Texas No N/A No personal income tax. A state Franchise Tax may apply to some trusts.
Utah Yes Settlor Domicile, Place of Administration Resident if created by will of UT decedent or administered in UT.
Vermont Yes Settlor Domicile Residency based on the domicile of the person who created the trust.
Virginia Yes Settlor Domicile As of July 1, 2019, residency is based on the settlor’s domicile.
Washington No N/A No state income tax. A capital gains tax applies only to individuals.
West Virginia Yes Settlor Domicile Residency based on settlor’s domicile. Some trusts can be exempt.
Wisconsin Yes Settlor Domicile, Place of Administration Residency based on settlor’s domicile. For older trusts, place of administration can be a factor.
Wyoming No N/A No state income tax for individuals or trusts.