22 April 2019

Malviya Attends Oral Arguments for U.S. Supreme Court

Raj Malviya, a partner in the Private Client Practice Group of Miller Johnson, attended oral arguments on April 16 at the United States Supreme Court in Washington D.C. The hearing was for the case North Carolina Department of Revenue v. the Kimberley Rice Kaestner 1992 Family Trust (Kaestner).

Mr. Malviya, as a Fellow in the American College of Trust and Estate Counsel (ACTEC) serving on the fiduciary income tax committee, was invited to be part of a committee of eight other national trust and estate experts to draft and file an amicus brief for this case (more at link). The brief they submitted was referenced in the April 16 oral arguments.

Mr. Malviya had this to say about the experience, “It was a privilege to collaborate with national experts on the ACTEC brief. The fiduciary income tax nexus rules across the states are nowhere close to being uniform and vary considerably in scope. Our goal was to provide education to the Court and focus the issues that govern this complex area of tax law. We felt that our brief made a meaningful impact in the case, as the taxpayer counsel’s brief cited to our brief as did other amicus briefs filed with the Court. The College (ACTEC) was also mentioned during the oral argument as a source of authority. We look forward to the Court’s decision and educating our colleagues and clients on the impact.”

Kaestner involves the constitutionality of North Carolina’s ability to tax a trust under its state law, which subjects a trust to taxation if a beneficiary is resident of the state. The family trusts were set-up in New York, the trustee is in Connecticut and the assets are in Massachusetts. Kimberley Rice Kaestner, one of the three beneficiaries, resides in North Carolina. So, the question is whether North Carolina’s taxing scheme is unconstitutional if the only connection to the trust is a resident contingent beneficiary, who may never receive a distribution.

The trust income tax case is already getting national attention from diverse media outlets including Forbes and Bloomberg. This is in part because:

  • The U.S sees $120 billion in income from trusts each year
  • Wealthy families can keep their money growing in trusts for a century or more
  • While most states tax a trust based on a certain level of contacts with the state, North Carolina is one of few states that taxes a trust based solely on the residence of a beneficiary in its state

ACTEC took no position in the Kaestner case but filed the amicus brief to “assist the Court in understanding the history and practice of state fiduciary income taxation as applied to accumulated income in nongrantor trusts and the complexities of such statutes in the context of the multi-state contacts common in today’s mobile society.”

Raj A. Malviya, J.D., LL.M. (Tax), practices in all areas of transfer tax and fiduciary income tax planning for private clients. Mr. Malviya has written and presented on the topic of state fiduciary income taxation in multiple state and national publications, platforms and conferences. He serves on the State Bar of Michigan Probate and Estate Planning Council, Directed and Divided Trusteeship and Uniform Fiduciary Income and Principal Act Committees for the Council. Mr. Malviya is a member of the Real Property Trusts and Estates and Taxation Sections of the American Bar Association (ABA).  He is active in the Fiduciary Income Tax and Transfer Tax Committees of the ABA and ACTEC. Mr. Malviya is ranked by Chambers in the annual High Net Worth Guide and recognized in Best Lawyers in America for both trusts and estates and tax law.

Miller Johnson is a full-service firm providing legal counsel to businesses and individuals in areas such as business and corporate, employment and labor, litigation, employee benefits, and estate planning.  In November 2018, U.S. News and World Report and Best Lawyers awarded Miller Johnson with tier 1 rankings for 27 practice areas in the Grand Rapids Metro area and nine practice areas in Kalamazoo.  For more firm information, visit our LinkedIn page.

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