We believe that today there are many individuals and companies involved in complicated and technical tax matters that require expertise and a specialized knowledge of the tax law.
Foreign Trust Services
It is no surprise that the United States is one of the most litigious countries in the world. High net worth individuals are constant targets of lawsuits – many frivolous. In an effort to protect themselves, many of our clients utilize foreign trusts to protect assets accumulated over a lifetime. Foreign trusts are one of the most effective methods to protect assets from unwanted and unwarranted claims. If you are either a grantor/settlor (owner) or a beneficiary of a foreign trust, then you have filing requirements that cannot be overlooked or ignored.
Foreign trusts have seen increased scrutiny in recent years from the Internal Revenue Service. In 2018, the IRS initiated a foreign trust information reporting campaign and is aggressively targeting non-compliant taxpayers in an effort to improve compliance.
Generally speaking, a U.S. person will have a reporting event when:
- A foreign trust is created
- Money is transferred to a foreign trust
- A distribution from a foreign trust is received
- The US person is treated as being the owner of the foreign trust
- The US person is a beneficiary of a foreign trust and receives a distribution
Foreign Grantor Trusts
When a U.S. grantor makes a gratuitous transfer to a foreign trust that has one or more U.S. beneficiaries or potential beneficiaries of any portion of the trust, that foreign trust is considered a grantor trust for U.S. income tax purposes. The trustee of a foreign grantor trust with a U.S. owner is required to file appropriate US tax forms with the IRS each year. Such forms include:
- An accounting of the trust’s activities for the year
- A “Foreign Grantor Trust Owner Statement” to each U.S. owner of a portion of the trust
- A “Foreign Grantor Trust Beneficiary Statement” to each U.S. beneficiary who received a distribution during the taxable year
These forms can be complex and extremely time consuming, and there are few tax firms that have the knowledge to prepare them. Our firm can help you satisfy your reporting obligations.