Structuring U.S. Trusts Classified as Foreign Trusts for Income Tax Purposes

Leveraging FATCA Rules in International Tax Planning, Ensuring Correct Form 8938 Reporting

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


Conducted on Wednesday, July 6, 2016

Recorded event now available

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Program Materials

This CLE/CPE webinar 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 will detail how FATCA and other foreign tax reporting requirements as 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 that have non-U.S.-based persons making material decisions on the operation of the trust, as well as 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 non-resident 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. Determining tax residence of trusts
    1. Court test
    2. Control test
  2. Status of U.S. grantor trusts where settlor is non-U.S. person
  3. Grantor trusts with non-U.S. grantors
  4. Chapter 4 FATCA status of U.S.-based trusts under FATCA regulations
  5. Planning opportunities
  6. Structuring U.S.-based foreign grantor trusts
  7. Common reporting standard

Benefits

The panel will discuss 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 foreign trust

Faculty

Nina Krauthamer
Nina Krauthamer

Counsel
Ruchelman

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

Arturo J. Aballí, Jr.
Arturo J. Aballí, Jr.

Atty
Aballi Milne Kalil

Mr. Aballi practices in the areas of international tax, trust and estate planning for high-net-worth families and...  |  Read More

Megan E. Campos
Megan E. Campos

Aballí Milne Kalil

Ms. Campos has a diverse background in all aspects of international taxation. Her practice is focused on designing...  |  Read More

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