WINSTON-SALEM, N.C.—For years, the North Carolina Department of Revenue has benefitted from an unusual law allowing the state to tax a trust’s accumulated income if a beneficiary lives in North Carolina. However, the North Carolina Court of Appeals ruled that the Department of Revenue unlawfully collected $1.3 million from an out-of-state trust, saying the department failed to demonstrate that the trust has “minimum contacts” with the state. But the Court of Appeals was clear to state that its ruling in the Kaestner case only applies to the facts of this specific case.

Womble Carlyle Trusts & Estates attorney Edward Griggs recently discussed the case with North Carolina Lawyers Weekly. Griggs, who is part of a North Carolina Bar Association committee considering legislative remedies to the state’s trust-related tax laws, said the Court of Appeals ruling shows the uncertainty surrounding the state’s trust fund tax laws.

 “Each new fact that a taxpayer’s situation has in contrast to Kaestner clouds reaching a result with certainty for that taxpayer,” Griggs tells North Carolina Lawyers Weekly.

“North Carolina’s fiduciary income tax law should be sufficiently detailed and clear for taxpayers to interpret its application with confidence, and the Kaestner holding does not completely rectify what some perfective to be Constitutional defects on the face of the statute.”

Edward Griggs focuses his practice on the areas of wealth transfer planning, charitable planning, trust and estate administration, and fiduciary litigation. Griggs provides customized, sophisticated and comprehensive tax and charitable planning for individual clients. In addition, he advises charitable and education clients about governance, tax compliance, grant-making and fundraising issues. He currently serves as Chair of the North Carolina Bar Association’s Estate Planning and Fiduciary Law Section.