Did you hear?  New change in the law: Minnesota trusts may not be subject to Minnesota Income Tax!

Based upon a recent Minnesota Supreme Court ruling (Fielding vs. Commissioner of Revenue) a trust set up as a MN trust may not need to stay a Minnesota resident trust for tax purposes for the entire life of the trust. 

If you have a trust that has been paying Minnesota tax on trust income, it is worth revisiting this to see if that tax can be avoided.   There are two possible favorable outcomes from this decision:

  • If a trust’s “relevant contacts” with Minnesota are not sufficient for Minnesota to impose a tax on trust income, then it may be possible to amend prior year trust returns and request a refund of MN taxes paid.
  • If the first option does not apply, there may be options to reduce the “relevant contacts” with the state of MN in future years. One of these ways is to name a trustee outside of the state of Minnesota in a favorable trust law state such as South Dakota. 

As a South Dakota Trust Company, Cornerstone Private Asset Trust Company can provide trustee services to help you reduce the “relevant contacts” between the trust and the state of Minnesota. 

Based upon this important case, now there is an opportunity to revisit the tax implications of existing trusts and try to reduce the tax owed.  Please give Chad Halbur a call to discuss the trust scenario to see how a South Dakota trust solution can help. 

 Chad M. Halbur

President

Cornerstone Private Asset Trust Company, LLC

 866-200-6528 or chalbur@cornerstonetrust.net

Ruled Unconstitutional: MN Trust Tax Law

Minnesota attorneys and friends, have you heard about the Fielding v Commissioner of Revenue finding?  

The ruling that was handed down on May 31, 2017 says, if you have an irrevocable trust created after 1995 that paid income taxes to Minnesota you may be entitled to a refund from the state. 

Previously Minnesota claimed irrevocable trusts as "resident trust" if the grantor was a resident of Minnesota at the time the trust became irrevocable, regardless of the trustees location or the location of the assets held and managed in the trust.  

This new ruling says that Minnesota cannot justify a tax based solely on one historical moment, the time the trust became irrevocable.  Constitutional Due Process holds that there must be a relationship between a tax imposed and the benefits or protections provided by the State.   Thus; a trust in which the Trustee is not a Minnesota resident, and the asset are held/managed outside of Minnesota there are no protections or benefits provided by the State of Minnesota and there for no relationship to justify state income tax.   

The decision of this case may have serious tax benefits for you and your clients but based on tax law there is only a limited amount of time to act and receive potentials refunds.  

Cornerstone Private Asset Trust is uniquely positioned, as a South Dakota Trust Company with a Minnesota office, to aid clients in working through this court decision.

If you would like more information please feel free to contact us as we would be happy to discuss your situation further.  


Additional resources on this case can be found at: 

Tax Refunds for Trust with Minnesota Grantors?