On June 21, 2019, the U.S. Supreme Court unanimously held that a state cannot tax trust income solely because the beneficiaries are state residents.

At issue in North Carolina Dep't of Revenue v. Kimberly Rice Kaestner 1992 Family Trust ("Kaestner") was North Carolina's law imposing tax on any trust income that "is for the benefit of" a North Carolina resident. North Carolina's Department of Revenue relied on this statute to tax the income of a trust purely because the beneficiaries were residents of North Carolina. No other connections between the trust and North Carolina existed: neither the trustee nor the settlor was a resident of North Carolina; the trust was administered in New York and Massachusetts; and there were no direct investments in North Carolina. Moreover, during the years in question, the beneficiaries received no distributions, had no right to demand trust income or to control trust assets, and had no assurance of ever receiving trust income; the out-of-state trustee had "absolute discretion" over the trust, including its termination.

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