Re: Tax Status: Foregn Trust Distribution
From: <pfeiffersoro_at_yahoo.fr>
Date: 1 Aug 2006 00:52:09 -0700 Interests in foreign trusts are reportable. If the beneficiary is not deemed a grantor and if the settlor doesn't has not been, is not, and does not become a US person such as to fall within the variious avoidance rules, then there should be no US tax.
See the definition of "distribution" at
Form 3520 addresses a reporting requirement and is quite apart from the issue of taxability. If the US person is not a deemed owner and not a distributee, no reporting is required. By and large, in Common Law countries, testamentary trusts (if that is what this is) are taxed as inheritances and taxation depends on the domicile (and in the case of the USA also nationality) of the settlor/testator. A tax treaty may be of some assistance in avoiding double taxation and/or determining tax residence/domicile. If there is a substantial amount of money involved you should see professional assistance. The penalties for failure to report, even innocently, are draconian. It is better to report redundantly or unnecessarily than to take a chance. On the other hand, "accidental" US persons who claim no benefit of US citizenship, have no assets, legatees, trust beneficiaries or legal heirs in the US or subject to US law are unlikely to be subject to enforcement attempts or their assets to transferee liability. (This group of persons includes those who have never been documented as US citizens, who lost their citizenship and had it involuntarily and retroactively restored by Supreme Court decision and certain expatriates like Marc Rich who have received pardons and thus cannot be prosecuted (although their US assets, if they had any, could still be seized.)
buschnotbush_at_yahoo.com wrote:
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