As successor trustee, I want to move our family trust's situs out of Illinois since all its assets and most beneficiaries are now elsewhere -- will that end the trust's Illinois residency and stop the double taxation with our other state?

Plain-English summary

A successor trustee asked whether moving a family trust's situs from Illinois to another state would end the trust's Illinois residency for income tax purposes. The trust was created in Illinois by the trustee's mother, who died there; its remaining assets (farmland, an easement, and stock) are now all located outside Illinois, and most current and future beneficiaries live outside the state too. Because the trust's situs remains Illinois, it currently files and pays Illinois tax on out-of-state rental income that the beneficiaries are ALSO taxed on by the other state -- a double-taxation problem the family hoped a situs change would fix.

The legal test for a resident trust. Illinois taxes trusts and estates as residents under 35 ILCS 5/201(a). A trust counts as an Illinois "resident" under 35 ILCS 5/1501(a)(20) if it's a testamentary trust created by the will of a decedent domiciled in Illinois, or an irrevocable trust whose grantor was domiciled in Illinois when the trust became irrevocable.

The Linn case sets a due-process floor, but this trust doesn't clearly clear it yet. In Linn v. Department of Revenue (2013), an Illinois appellate court found that taxing a trust as an Illinois resident violated due process once the trustee, beneficiaries, assets, and all trust business had moved entirely outside Illinois -- the state's only remaining connection was the original grantor's decades-old Illinois domicile, which the court held wasn't enough on its own (citing Quill and Moorman's minimum-connection standard). The court also noted that an inter vivos (living) trust's tie to a state is more attenuated than a testamentary trust's (citing Chase Manhattan Bank v. Gavin).

The key difference here: unlike the trust in Linn, which had zero remaining Illinois beneficiaries by the time of the lawsuit, this family's trust still has at least one current beneficiary and one contingent beneficiary living in Illinois. The Department didn't say a situs change couldn't work -- it can be done through court action -- but it stopped short of confirming the trust would actually stop being an Illinois resident afterward, since that still depends on reapplying the 1501(a)(20) test (as Linn interprets it) to whatever the post-move facts turn out to be, including that remaining Illinois beneficiary connection.

How trust income gets taxed either way. A trust is generally taxed only on income it doesn't distribute (or isn't required to distribute) to beneficiaries; beneficiaries are taxed on the shares actually distributed to them. If the trust is an Illinois resident, 100% of its (undistributed) income is allocable to Illinois under 35 ILCS 5/301, though a credit for taxes paid to other states is available under 35 ILCS 5/601(b)(3) (with any Illinois tax deducted federally added back). If the trust is a nonresident, its income is apportioned like other nonresidents' income. Separately, any beneficiary who is an Illinois resident is taxed on 100% of their own distributed share regardless of the trust's own residency status, though that beneficiary may also qualify for an out-of-state tax credit.

What this means for you

Trustees considering moving a trust's situs out of Illinois

A situs change alone doesn't guarantee an end to Illinois residency -- the Department will still test the trust's connections to Illinois under 35 ILCS 5/1501(a)(20) as interpreted by Linn. If even one beneficiary remains in Illinois, expect a real connection the Department will weigh, unlike the Linn trust which had none left.

Families facing double state taxation on trust assets

The out-of-state credit mechanism (35 ILCS 5/601(b)(3) for the trust, or an equivalent credit for an individual beneficiary) is the built-in relief valve for taxes paid to both states -- explore that path alongside (or instead of) a situs change, since a situs change's tax benefit isn't guaranteed until the full connections test is satisfied.

Estate planners and accountants

Track the Linn factors closely: trustee location, beneficiary residency, asset location, and where the trust's business is actually conducted. Also note the testamentary-vs-inter-vivos distinction Linn draws -- a testamentary trust (like this one) may have a stickier Illinois connection than an inter vivos trust with the same facts otherwise.

Common questions

Q: Does moving a trust's situs automatically end its Illinois tax residency?
A: No. Illinois residency for a trust depends on the statutory test in 35 ILCS 5/1501(a)(20) (tied to the grantor's or decedent's domicile) and the due-process connections analysis from Linn v. Department of Revenue -- a situs change is a step, not an automatic result.

Q: What did the Linn case actually decide?
A: That taxing a trust as an Illinois resident violated due process once the trustee, beneficiaries, assets, and trust business had all moved entirely outside Illinois, leaving only the original grantor's historical Illinois domicile as a connection -- which the court found insufficient on its own.

Q: Does having even one Illinois-resident beneficiary matter?
A: Yes -- the Department specifically distinguished this situation from Linn because at least one current and one contingent beneficiary still live in Illinois, a live connection the Linn trust no longer had by the time of that case.

Q: If the trust remains an Illinois resident, is all its income taxed by Illinois?
A: 100% of an Illinois-resident trust's undistributed income is allocable to Illinois, but the trust can claim a credit for taxes properly paid to another state (with any Illinois-tax deduction added back federally first).

Citations and references

Statutes and cases:

• 35 ILCS 5/201(a) (tax imposed on trusts and estates as residents)
• 35 ILCS 5/1501(a)(20) (resident trust definition)
• 35 ILCS 5/301 (allocation of trust/beneficiary income)
• 35 ILCS 5/601(b)(3) (credit for taxes paid to other states)
• Linn v. Department of Revenue, 2013 IL App (4th) 121055
• Quill Corp. v. North Dakota, 504 U.S. 298 (1992); Moorman Mfg. Co. v. Bair, 437 U.S. 267 (1978)
• Chase Manhattan Bank v. Gavin, 733 A.2d 782 (Conn. 1999)

Source

• Landing page: https://taxarchive.illinois.gov/research/legal/letter-rulings/income-tax/2025.html
• Original PDF: https://tax.illinois.gov/content/dam/soi/en/web/taxarchive/research/legal/letter-rulings/income-tax/2025/it25-0009-gil.pdf

Original ruling text

IT 25-0009-GIL 09/11/2025 RESIDENCY
Changing the situs of a trust may result, depending on other relevant factors,
in a change of residence for tax purposes. (This is a GIL).
September 11, 2025
NAME
ADDRESS
EMAIL
Re:

Residency of trust

Dear NAME:
This letter is in response to your letter dated October 25, 2023, in which you
requested information. The Department issues two types of letter rulings. Private
Letter Rulings (“PLRs”) are issued by the Department in response to specific
taxpayer inquiries concerning the application of a tax statute or rule to a particular
fact situation. A PLR is binding on the Department, but only as to the taxpayer who
is the subject of the request for ruling and only to the extent the facts recited in the
PLR are correct and complete. Persons seeking PLRs must comply with the
procedures for PLRs found in the Department’s regulations at 2 Ill. Adm. Code
1200.110. The purpose of a General Information Letter (“GIL”) is to direct taxpayers
to Department regulations or other sources of information regarding the topic about
which they have inquired. A GIL is not a statement of Department policy and is not
binding on the Department. See 2 Ill. Adm. Code 1200.120. You may access our
website at https://tax.illinois.gov/ to review regulations, letter rulings and other
types of information relevant to your inquiry.
The nature of your inquiry and the information you have provided require that we
respond with a GIL. In your letter you have stated and made inquiry as follows:
I am contacting you regarding the situs of the NAME Trust DTD DATE, EIN # XXXXXXXXX. I found a letter on the Illinois Department of Revenue’s web site you had
written in response to another inquiry about moving the situs of a trust and hope you
are the right person for me to contact. If not, could you please let me know who to
reach out to. I am not sure I have the correct mailing address for you, so I am
contacting you by email and through the USPS. I apologize for any confusion that
may cause.
NAME was my mother and she passed away in Illinois in DATE1. I am the successor
trustee to her trust. The trust was drawn up in Illinois, where she lived. All
beneficiaries of the trust, including myself, would like to move the situs of the trust
to STATE for the following reasons:

•

•
•

All of the assets in the trust, and income from them, reside outside of
Illinois. These include:
• Four parcels of farm land in STATE which earn rental income.
• Rental income for easement rights across one of the above
parcels for planned power cables connecting turbines on a
wind farm planned for the area.
• 90 shares of stock in a company based in CITY, STATE1.
We would like to reduce the number of tax returns the trust has to file.
Currently the trust files Federal, Illinois, and STATE returns.
Three of the four current beneficiaries of the trust reside outside of Illinois
and four out of the five next generation beneficiaries live outside of Illinois.
Those of us living outside Illinois would rather not have to file an Illinois
income tax return in addition to our home state, Federal, and STATE
returns.

Since the situs of the trust is in Illinois, the trust currently files an Illinois income tax
return and pays income tax on the STATE farm rental income to Illinois. The four
current beneficiaries receive Illinois K-1 forms and each of us file an Illinois income
tax return. The three of us that are non-residents receive a pass-through tax credit
from the trust return and receive a small refund from Illinois (less than $100).
Since the rental income comes from STATE, the trust and the beneficiaries also file
STATE income tax returns. The trust pays no taxes to STATE because all the income
in passed on to the beneficiaries on STATE K-1 forms. Each beneficiary files an
STATE return and pays STATE taxes on the rental income, which is reasonable. The
result of this is that the STATE rental income is being taxed twice: the trust is paying
taxes to Illinois and the beneficiaries are paying taxes to STATE.
I have attached to my email and included with the duplicate letter I am sending by
the USPS documents and information a lawyer in STATE has sent me regarding
moving the situs of a trust out of Illinois. This situation seems similar to the case
described in the Illinois Bar Journal article included in the USPS mail and attached
to the email in the file Illinois_Bar_Journal_Article.pdf. I am hoping, since the trust
currently has no assets or income from Illinois this change in situs will be
possible.
Please let me know what further actions I need to take. Thank you for considering
this request.
DEPARTMENT’S RESPONSE:

In the facts listed in the letter, the current situs of the trust is Illinois although the
trust assets consist of farmland in STATE. Three of the four beneficiaries live in
STATE. The request is to move the situs of the trust to STATE.
35 ILCS 5/201(a) of the Illinois Income Tax Act (IITA) states as follows:
(a) In general. A tax measured by net income is hereby imposed on every
individual, corporation, trust and estate for each taxable year ending after
July 31, 1969 on the privilege of earning or receiving income in or as a
resident of this State. Such tax shall be in addition to all other occupation or
privilege taxes imposed by this State or by any municipal corporation or
political subdivision thereof.
Therefore, if the trust is a “resident” of Illinois, it may be subject to Illinois tax.
35 ILCS 5/1501(a)(20) of the Illinois Income Tax Act (IITA) states in pertinent part as
follows:
(20) Resident. The term “resident” means:
(A) an individual ….;
(B) The estate of a decedent who at his or her death was domiciled in
this State;
(C) A trust created by a will of a decedent who at his death was
domiciled in this State; and
(D) An irrevocable trust, the grantor of which was domiciled in this
State at the time such trust became irrevocable. For purpose of this
subparagraph, a trust shall be considered irrevocable to the extent
that the grantor is not treated as the owner thereof under Sections
671 through 678 of the Internal Revenue Code.
The residence of a trust is connected to whether the trust is irrevocable and where
the grantor was domiciled when the trust became irrevocable. This issue was
discussed in Lewis Linn v. Department of Revenue, 2013 IL.App (4th) 121055. The
court found that the taxation of the trust was a violation of the due process clause
due to insufficient minimum connections between the trust and Illinois. The
argument was that the trust in Linn did not have even the minimum connections to
Illinois to subject it to jurisdiction. In Linn, twenty separate irrevocable trusts were
created. At the time of the creation, the trustee, the trust creator, and the trust assets
were all located within Illinois. Over the subsequent decades, the trust assets and
beneficiaries shifted until most of the assets, beneficiaries, and trustees were no
longer in Illinois. At several points over the years actions were filed in Texas to realign
the trusts to be regulated under Texas law, although some terms (such as “income,
principal, and power of appointment”) were still defined by Illinois law. By 2004, an
action was filed to construe the trusts entirely under Texas law. At this time, the

beneficiaries and assets were all located outside Illinois. In April 2007, the trust filed
as a nonresident and reported no Illinois income. The trust was reclassified by IDOR
as an Illinois resident and taxed 100% of the trust’s reported income. The plaintiff
responded that this was a violation of the due process and equal protection clauses
of the United States Constitution (U.S. Constitution Art. I, Section 8, Art. IX, Section
2). “For a tax to comply with the due process clause, (1) a minimum connection must
exist between the state and the person, property, or transaction it seeks to tax, and
(2) ‘the income attributed to the State for tax purposes must be rationally related to
values connected with the taxing State.’ …” citing to Quill Corp. v. North Dakota, 504
U.S. 298, 306 (1992) and Moorman Manufacturing Co. v. Bair, 437 U,S, 267, 273
(1978). In Linn, the assets of the trust, the beneficiaries, the trustee and protector of
the trust were all located outside Illinois by the time of the suit. The court
differentiated between an inter vivos and a testamentary trust, finding that “[s]ince
an inter vivos trust is not created by the probate of the decedent’s will in a state court,
its connection with the state has been described as more attenuated than a
testamentary trust. “Linn, citing Chase Manhattan Bank v. Gavin, 733 A.2d 782
(Conn. 1999). Specifically, the court found that inter vivos trusts do not have as
permanent of a tie to a given state as a testamentary trust. The mere fact that a
grantor resided in a given state is not enough of a connection to overcome the due
process argument. The court additionally found that the trust was receiving benefits
and protections of Texas law by the time of the case, not Illinois law. Because the
trustee, beneficiaries, trust assets, and the business of the trust were all conducted
in outside Illinois, the court found insufficient contacts between the trust and Illinois
to subject it to taxation within Illinois. Having decided the matter on the due process
question, the court did not address the commerce clause argument.
Similarly to Linn, in the facts set forth in your letter, the question of trust residency
depends upon the sufficiency of contacts between the trust, beneficiaries, and
Illinois. Although the trust assets are located outside of Illinois, at the present time,
at least one beneficiary, and one contingent beneficiary, do reside within Illinois. The
trust situs may of course be changed through the actions of a court. If the situs is
changed from Illinois to STATE, then the determination should be made as to whether
the trust may still be considered an Illinois resident under the definition found in 35
ILCS 5/1501(a)(20), as interpreted by Linn.
Generally speaking a trust is taxable only on income which is not distributed or
required to be distributed to beneficiaries, and beneficiaries are taxed only on the
shares of trust income distributed or required to be distributed to the beneficiaries.
If the trust is an Illinois resident, then 100% of the income is allocable to Illinois under
35 ILCS 5/301. This income may be allowed a credit for taxes paid to other states
under Section 601(b)(3) so long as any Illinois income tax deducted in computing the
federal taxable income is added back. If on the other hand the trust is not an Illinois
resident, the trust income will be subject to apportionment like other nonresidents.
In the case of a beneficiary who is an Illinois resident, 100% of their income is

allocable to Illinois under Section 301, although the beneficiary may qualify for a
credit for taxes paid to other states.
As stated above, this is a general information letter which does not constitute a
statement of policy that applies, interprets or prescribes the tax laws, and it is not
binding on the Department. If you are not under audit and you wish to obtain a
binding Private Letter Ruling regarding your factual situation, please submit all of the
information set out in items 1 through 8 of Section 1200.110(b).
I hope this information is helpful. If you require additional information, please
visit our website at https://tax.illinois.gov/ or contact the Department’s Taxpayer
Information Division at 800-732-8866.
Very truly yours,
Javonna Ackerman
Associate Counsel
JA:slc