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Foreign Trust Challenges for U.S. Tax Professionals

Navigating Tax Traps and Opportunities, Fiduciary Accounting Income, Form 3520, and FATCA Compliance

Note: CLE credit is not offered on this program

Recording of a 110-minute CPE webinar with Q&A

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Conducted on Thursday, August 6, 2020

Recorded event now available

or call 1-800-926-7926

This course will explore the U.S. tax compliance and accounting issues arising from foreign trust income. The panel will discuss specific U.S. tax planning issues for foreign trusts that tax advisers and tax counsel should understand.


When U.S. taxpayers have established, funded or can potentially benefit from a foreign trust, a series of complicated tax and reporting rules come into play. The objective of this program is to provide you with the tools necessary to advise your client regarding proper compliance and planning for his or her foreign trust. For starters, you will need to be able to identify what is or isn’t classified as a foreign trust. The application of these rules to retirement plans in particular can be tricky. Once you have confirmed that you are dealing with a foreign trust, it is crucial that you be able to understand and calculate how your client might be taxed with respect to the trust. In certain cases, your client will be required to pick up all income from the trust, and in others your client will be taxed only on actual or “deemed” distributions from the foreign trust. An understanding of the US tax classification of the foreign trust is crucial to making these determinations.

In addition to these complicated tax rules, the US rules can require detailed reporting by trust grantors, beneficiaries, and in some cases the trust itself. Reporting can be required in certain cases even if your client has not received a distribution from the foreign trust in a traditional sense. It is important to understand these rules because penalties for non-compliance can be significant.

Listen as our panel of experienced advisers reviews the above issues and helps you to understand how best to advise clients with these issues.



  1. Identification of Foreign Trusts
    1. Court Test
    2. Control Test
  2. Categories of Foreign Trusts
    1. Grantor
    2. Non-Grantor
    3. “Estate Blocker” versus “Estate Taxable” Foreign Trusts
  3. US Estate Tax Considerations for Foreign Trusts
  4. US Income Tax Considerations for Foreign Trusts
    1. Tax Consequences for Foreign Grantor Trusts
    2. Throwback Tax for Foreign Non-Grantor Trusts
    3. Transfer of Appreciated Property to Foreign Trusts
    4. Beneficiary Use of Trust Property
    5. Qualified Obligations
    6. Distributions through Intermediaries
    7. CFC and PFIC Attribution
  5. Reporting Obligations with Respect to Foreign Trusts and Related Issues
    1. Creation of Foreign Trust
    2. Transfer of Assets to Foreign Trust
    3. Death of US Owner of Foreign Trust
    4. Annual Reporting for US Owners
    5. Reporting by US Beneficiaries of Foreign Trusts
    6. Form 1040, Schedule B


The panel will explore these and other relevant issues:

  • Proper completion of Forms 3520 and 3520-A in various scenarios
  • Preparing Foreign Trust Beneficiary Statements
  • Calculating tax on accumulation distributions
  • Properly reporting loans, distributions and gifts
  • Strategies for addressing non-compliance


Brittain, Cindy
Cindy D. Brittain


Ms. Brittain serves as a trusted counsel to high-net-worth families in the United States and abroad to implement...  |  Read More

Lazo, Christiana
Christiana M. Lazo


Ms. Lazo’s practice consists of representing ultra-high net worth individuals, their family offices, and closely...  |  Read More

Lipoff, Lawrence
Lawrence M. Lipoff, CPA, TEP, CEBS


With more than 30 years of experience, Mr. Lipoff specializes in the delivery of domestic and international private...  |  Read More

Vergara, Edward
Edward Vergara

Arnold & Porter

Mr. Vergara works with U.S. and foreign individual clients on domestic and international investment and succession...  |  Read More

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