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Structuring U.S. Governed Law Trusts Classified as Foreign Trusts for U.S. Tax Purposes

Recording of a 90-minute premium CLE/CPE video webinar with Q&A

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Conducted on Thursday, July 15, 2021

Recorded event now available

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This CLE/CPE course will provide a deep dive into the planning opportunities and reporting requirements for U.S.-based trusts that must file as non-domestic trusts for income tax purposes. The panel will discuss what constitutes "substantial decisions by non-U.S. persons" for trusts, structuring considerations to maximize income tax savings by utilizing a U.S.-based foreign trust, and detail how FATCA and other foreign tax reporting requirements on non-domestic entities impact trust drafting and operation.

Description

Even though a trust is incorporated in the U.S., with a U.S-based trustee, it may still be required to be classified as a foreign trust for purposes of U.S. income tax reporting and withholding. Trusts with non-U.S.-based persons making material decisions on the operation of the trust and trusts with non-U.S. settlors must be treated as foreign trusts, even if based in the U.S., and follow the more complicated filing rules for non-domestic trusts.

This classification difference provides sophisticated planning opportunities for tax counsel advising both resident and nonresident individuals. Increasingly, foreign-based trust companies are relocating trusts previously operating offshore into the United States, and U.S.-based trust companies are following suit.

By structuring a trust document properly, tax counsel can help clients maximize both privacy from disclosure and income tax savings. Tax counsel structuring trust documents to operate as foreign trusts while having situs in the U.S. must have detailed knowledge of the FATCA filing requirements to ensure the trust documents achieve the intended tax savings purpose.

Listen as our experienced panel of expert advisers provides a practical guide to navigating the complexities of the planning opportunities of U.S.-based foreign trusts.

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Outline

  1. What is a trust for U.S. tax purposes
  2. Determining tax residence of trusts
    1. Court test
    2. Control test
  3. Grantor trusts with non-U.S. grantors
  4. Chapter 4 FATCA status of U.S.-based trusts under FATCA regulations
  5. Common reporting standard
  6. U.S. tax and information filing obligations for U.S. based foreign grantor trusts
  7. Planning opportunities and structuring considerations for U.S.-based foreign grantor trusts

Benefits

The panel will review these and other critical issues:

  • Court test vs. control test for determining whether a U.S.-based trust is a foreign or domestic trust
  • Foreign filing requirements for all trusts, whether U.S.-based or not, that have foreign assets
  • What are the filing requirements for foreign grantor trusts to certify Chapter 3 withholding status?
  • W-8BEN filing requirements for non-grantor trusts
  • Certifying Chapter 4 FATCA status for U.S.-based trusts filing as a foreign trust

Faculty

Krauthamer, Nina
Nina Krauthamer
Member
Ruchelman

Ms. Krauthamer focuses her practice on federal, state and international tax matters involving high net worth...  |  Read More

Wioncek, Jennifer
Jennifer J. Wioncek
Partner
Bilzin Sumberg Baena Price & Axelrod

Ms. Wioncek is an experienced tax lawyer handling the needs of high net worth clients and cross-border families. The...  |  Read More

Garcia, Osvaldo
Osvaldo Garcia
Attorney
Bilzin Sumberg Baena Price & Axelrod

Mr. Garcia is a tax and private wealth planning attorney who focuses on international and domestic estate planning,...  |  Read More

Access Anytime, Anywhere

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