Estate in MI and Trustee in IL

[LindaB]

I have a client whose mother passed away last year. The mother lived in MI, and the client lives in MI. Clients brother is the trustee, and he lives in IL. The brother gave my client a federal K-1 (form 1041) and also an IL K-1, and filed an IL-1041. According to the IL K-1 the 'pass-through entity made tax payment on behalf of the nonresident beneficiary'. Is this right? I don't do estate returns, but it doesn't seem right to me that an estate in MI, all property in MI, would have to file an IL estate return just because the trustee lives in IL. I asked my client to ask her brother why he filed with IL, the only useful information she came back with was that he did the estate returns himself on Turbo Tax. Would IL be looking for a non-resident tax return from my client?

[Catherine]

I have a client whose mother passed away last year. The mother lived in MI, and the client lives in MI. Clients brother is the trustee, and he lives in IL. The brother gave my client a federal K-1 (form 1041) and also an IL K-1, and filed an IL-1041. According to the IL K-1 the 'pass-through entity made tax payment on behalf of the nonresident beneficiary'. Is this right? I don't do estate returns, but it doesn't seem right to me that an estate in MI, all property in MI, would have to file an IL estate return just because the trustee lives in IL. I asked my client to ask her brother why he filed with IL, the only useful information she came back with was that he did the estate returns himself on Turbo Tax. Would IL be looking for a non-resident tax return from my client?

This may be a question for the lawyers, as I don't know any specific state rules for either of those states. However, it certainly seems to me that the estate is not an IL estate but rather at MI estate. MI has a claim under their laws for estate tax due to them from one of their citizens. Why should it matter to them whether the trustee is in MI, IL, or Timbuktu?

My guess is that brother gets to amend, and your client goes on extension until the estate errors are fixed.

[LindaB]

Thanks, Catherine. The more I think about it the more I think the brother made a mistake--Turbo Tax asked him where he lived and he said IL.