This type of question comes up a lot in my Florida estate practice. Based on what you have disclosed and my research of KY law (below), you would not owe or need to report in KY or FL. Florida is one of seven states that impose no fiduciary income tax and KY would only tax you on trust income from KY(which you say there is none).
In general, states tax trusts using many of the same principles that apply to individuals. For example, a “resident” trust is typically taxed on all of its undistributed income (i.e., income that is not reported by the beneficiaries); while a “nonresident” trust is only taxed on undistributed income sourced to a particular state. Most states use a combination of the following four “Trust Factors” to determine if a trust is a resident or nonresident:
- Grantor’s state of residence (either at death or when the trust becomes irrevocable);
- Location of the trustees;
- Location of the beneficiaries; and
- Location of the trust assets.
A trust is considered to be a Kentucky trust if the principal place of administration of the trust takes place in Kentucky. The principal place of administration of a trust is the trustee’s usual place of business where the records of the trust are kept, or at the trustee’s residence is he has no such place of business.
Nonresident estates and trusts are subject to tax on income from Kentucky sources; from activities carried on in Kentucky; from performance of services in Kentucky; from real or tangible property located in Kentucky; and from partnership or s-corporation doing business in Kentucky. Income from intangibles attributed to nonresident beneficiaries is not taxable on the Kentucky Fiduciary Return.
