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money was set up for my parents in a trust fund
spendthrift :(

the trust fund has it's own TPID, but the tax liability flows thru to me (and my brother).

I've got a bit of a disconnect here. How is it that the trust is set up for your parents, but you have the tax liability? Are your parents still alive?

Trusts are not like partnerships. Even though they both use a schedule K-1, the trust income does not necessarily flow through to the beneficiaries. The trust itself can pay taxes, and the beneficiaries are typically taxed only to the extent they received income from the trust.

So for you to be paying taxes, the trust income must, in all liklihood, be coming to you.

Further, the beneficiaries are not the decision makers in the trust, it is the trustee that makes the decisions. The trustee can, however, consult with the beneficiaries before making decisions. Sometimes, these conversations take place in front of a mirror, especially when the trustee is also the beneficiary. However, with a spendthrift trust, I suspect that is not the case here. You kind of defeat the purpose of spendthrift provisions when you make the beneficiary the trustee. <grin>

Having done all that rambling, if you live in CA, you would need the trust to invest in a CA tax free fund if you want to receive income that is tax-free in CA. A NY tax-free fund would still be taxable on your CA return.

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