Estate Planning With Foreign Trusts and U.S. Beneficiaries: Tax Issues, Residency, Foreign Anti-Deferral Rules

U.S. owners and beneficiaries of foreign trusts are subject to complex tax rules and reporting obligations that are different from those applicable to domestic trusts. Tax and estate planners must recognize the variety of issues associated with foreign trusts with U.S. owners or beneficiaries, such as the applicable residency rules, complex tax laws, and foreign anti-deferral rules.

Tax and estate planners must determine under U.S. tax rules whether an arrangement is a trust, the residency of the trust as foreign or domestic, and the characterization of the trust. In addition to the code and regulations, the IRS and courts have provided guidance. Determination of a trust's residency and characterization will determine the potential income and estate tax impact to the beneficiaries, including potential attribution of ownership entities owned by the trust and complex information reporting obligations.

Tax and estate planning advisers must establish strategies to ensure that U.S. owners and beneficiaries of foreign trusts avoid any unintended tax liability on interests of foreign trusts, including such trusts' interest in foreign partnerships or corporations while avoiding foreign anti-deferral rules.

Listen as our panel discusses the challenges of foreign trusts with U.S. beneficiaries, residency rules, effective methods to ensure tax savings, achieving tax-free step-up in basis, and understanding the obligations of both trustees and beneficiaries of foreign trusts.

I. Issues of foreign trusts with U.S. beneficiaries in estate planning

II. Determining tax residency and applicable rules

III. Understanding tax rules and reporting obligations of foreign trusts for U.S. estates and taxpayers

IV. Obtaining a tax-free step-up in basis

V. Applicability of foreign anti-deferral rules and methods to avoid them

The panel will review these and other key issues:

• Determining if an arrangement is classified as a trust
• Avoiding pitfalls of complex tax rules and reporting obligations
• Understanding residency rules and the use of domestication to benefit the estate
• Section 671 and qualifying NRA grantors as tax owners
• Section 679 rules on pre-immigration trusts
• Methods to achieve step-up in basis
• Effective techniques to avoid foreign anti-deferral rules
• Best practices for counsel in overcoming challenges of foreign trusts with U.S. beneficiaries

Learning Objectives:

After completing the course you will be able to:

• Determine if an arrangement is classified as a trust for tax purposes
• Recognize pitfalls of complex tax rules and reporting obligations of foreign trusts
• Understand residency rules and the use of domestication to benefit the estate
• Identify key issues stemming from Section 671 and qualifying NRA grantors as tax owners
• Understand Section 679 rules on pre-immigration trusts
• Ascertain methods to achieve step-up in basis

• Field of Study: Taxes
• Level of Knowledge: Intermediate
• Advance Preparation: None
• Teaching Method: Seminar/Lecture
• Delivery Method: Group-Internet (via computer)
• Attendance Monitoring Method: Attendance is monitored electronically via a participant's PIN and through a series of attendance verification prompts displayed throughout the program
• Prerequisite:

Strafford Publications, Inc. is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of Accountancy have final authority on the acceptance of individual courses for CPE Credits. Complaints regarding registered sponsons may be submitted to NASBA through its website: www.nasbaregistry.org.