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

This CLE course will guide estate planners on overcoming the challenges of foreign trusts with U.S. beneficiaries in estate planning. The panel will discuss complex tax rules and reporting obligations, entity and residency classification rules, and qualifying nonresident alien (NRA) grantors as tax owners under Sections 671 and 679, achieving a step-up basis, and techniques to avoid 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.