As you work on your estate plan, you will learn about a range of products you can use to leave your assets to heirs or organize the different aspects of your estate. One such term you may hear is a resident trust.
According to the State of New Jersey website, a resident trust is simply a trust created by someone who has resident status in the state.
To have resident status to create a resident trust, you must live in New Jersey at the time you die or need to have lived in the state when you transferred the assets into the trust and the trust must be irrevocable.
Taxation of the trust
The main reason to concern yourself with whether your trust is a resident trust or not is for taxation purposes. Your heirs will need to be aware of the trust status so that they file the proper paperwork and pay the right taxes on the assets within the trust.
If they have a gross income over $10,000, then they will need to file the New Jersey Gross Income Tax Fiduciary Return for your trust.
However, the trust may not be subject to New Jersey taxation in certain situations. The trust needs to have a trustee located in New Jersey for taxation. If the trust does not have income from sources located in the state, then there is no tax owed. In addition, if the trust does not have tangible assets located in the state, there is no tax due.
If it is not subject to New Jersey taxes, then you will have to ensure your heirs still file the New Jersey Gross Income Tax Fiduciary Return and check the line 26 box. They also need to submit a statement from a fiduciary that states the trust isn’t subject to taxation.