In April, the Supreme Court of the United States will hear an appeal against North Carolina's practice of taxing the undistributed income of an out-of-state trust that has a beneficiary living in the state.

North Carolina is one of 11 states that consider trusts taxable when they hold income for a person who is using the state's services, but US courts have reached different results about whether the due process clause prohibits states from taxing trusts based on trust beneficiaries’ in-state residency.

The outcome of NC Department of Revenue v. The Kimberley Rice Kaestner 1992 Family Trust will determine whether individuals are able to avoid state taxes by placing assets with trustees in states with no income tax liability.