Where trusts have a US settlor (Grantor) or beneficiary, there will almost certainly be a requirement to file returns to the IRS.
Foreign Grantor Trusts must be reported by the grantor if he or she is a US person (US citizen Green Card Holder or US resident). All income and gains from the trust will pass through to the grantor and must be reported on his or her tax return on a current year basis. This can involve some complex filings, especially if the trust has interests in other entities such as companies or funds.
Foreign Non-Grantor trusts with US beneficiaries can be even more complicated. Returns only have to be filed by the trust when distributions are made, but if income and gains have accrued over a number of years, the accounting and reporting when distributions are made can be very complex indeed. In addition, the accumulated income and gains may be subject to the so-called ‘throwback’ tax rules, whereby income is attributed to the year in which it arose and then subject to a punitive interest charge.
US grantors and beneficiaries of trusts will need help planning their affairs to mitigate their exposure to some punitive US tax rules and to reduce the complexity of their tax filings. We can help them with this planning. We can also assist with the filing of any forms that need to be submitted to the IRS.
If you are a US grantor or beneficiary of trusts and would like to find out how we can work together to make managing them easier, get in touch via the form below.