Trust Distributions to Foreign Beneficiaries: Complex Planning and Calculation Challenges

Navigating the Interplay of Foreign Withholdings, Treaty Benefits, DNI Calculations, and Trust Compliance

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

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Conducted on Tuesday, February 27, 2018

Recorded event now available

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Course Materials

This course will provide estate and trust tax advisers and compliance professionals with a thorough and practical guide to the tax compliance issues that fiduciaries face before making or allocating U.S. domestic trust or estate distributions to foreign beneficiaries. The panel will explain how to determine the U.S. status of foreign beneficiaries for U.S. tax purposes, detail how to calculate required withholding tax and net distribution amounts, discuss DNI implications of foreign beneficiaries, and explore the application common tax treaty benefits.


Among the most complex tasks for fiduciaries and their tax advisers is distribution planning for domestic trusts with foreign and nonresident alien beneficiaries. The presence of a non-U.S. person as a beneficiary complicates trust status and imposes significant additional duties on executors and fiduciaries, and tax advisers should be well-versed in the differences in treatment between trusts with foreign beneficiaries as opposed to all domestic beneficiaries.

Merely having a foreign beneficiary adds layers of withholding and compliance requirements for fiduciaries with discretionary power over distributions. Fiduciaries must determine the tax status of beneficiaries prior to planning distributions to avoid serious tax issues for the trust and the beneficiaries.

Complicating matters further for tax advisers is exploring whether a foreign beneficiary may avail himself of a treaty provision that would alter the income tax treatment of any planed distribution. Depending on the nature of the trust income available for distribution and various treaty provisions, some income may be treated differently when allocated or distributed to a foreign beneficiary than it would to a U.S. person. Withholding requirements on income paid to foreign persons create yet another tax trap for fiduciaries and their advisers.

Listen as our experienced panel provides a thorough and practical guide to distribution planning involving trusts with foreign beneficiaries.



  1. Simple trusts with foreign beneficiaries
  2. Withholding requirements for trusts allocating distributions to foreign beneficiaries
  3. Impact of tax treaty provisions on trusts with non-U.S. beneficiaries
  4. Additional tax reporting requirements for trusts and foreign beneficiaries
  5. Critical components of distribution planning
  6. Impact foreign beneficiaries may have on DNI calculations


The panel will discuss these and other critical questions:

  • What must fiduciaries and their tax advisers know to verify the tax status of foreign or “non-U.S.” beneficiaries?
  • What are the withholding requirements on distributions, either actual or allocated, to foreign beneficiaries?
  • What are the reporting requirements for both the trust and its foreign beneficiaries on trust distributions?
  • What impact do tax treaties have on calculation of net distributable amounts?
  • What income items must be treated differently for fiduciary accounting income and DNI calculation purposes when a trust has a non-U.S. person as a beneficiary?


DePasquale, Paul
Paul F. DePasquale

Baker & McKenzie

Mr. DePasquale advises individuals and multinational entities on international and domestic tax planning, cross-border...  |  Read More

Mehany, Dianne
Dianne C. Mehany

Caplin & Drysdale

Ms. Mehany's practice focuses on international tax planning and controversies, including inbound and outbound tax...  |  Read More

Read, Rodney
Rodney W. Read

Baker McKenzie

Mr. Read’s practice focuses on wealth management, pre-immigration planning, international estate planning and...  |  Read More

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