There
have been inquiries regarding
succession of foreign
granted trusts. One question
in particular is if an
individual should be
named as successor of
a foreign granted trust,
and the grantor is still
alive, would he/she need
to report this to the
IRS?
According
to the instructions
in IRS Form 3520-A
(Annual Information
Return of a Foreign
Trust With a U.S. Owner) "Each person treated as an owner of any portion of a foreign trust under (tax
code) sections 671
through 679 is responsible
for ensuring that the
foreign trust files
form 3520-A and furnishes
the required annual
statements to its U.S.
owners and U.S. beneficiaries." There is a requirement that Form 3520 must be filed by the grantor of a foreign
trust, by any U.S.
person who receives
a distribution from
a foreign trust, by
any U.S. person who
has loaned money to
or borrowed money from
a foreign trust and
by US citizens who
have received gifts
over $100,000 from
foreign individuals,
or gifts from foreign
corporations or partnerships
in excess of $12,097
for the year 2004.
There
is usually only one
trust granter in most
foreign trusts. But,
as suggested by IRS
instructions, it is
possible that there
could be more than
one trust grantor,
although it’s rare
for someone to be
a "successor" grantor.
But it is possible
for a trust beneficiary
to become a trust grantor
because of the terms
of the trust. The instructions
to Form 3520 provide
basic information about
who is a trust grantor.
However, the final
determination depends
on the terms
of the trust and it
what manner the trust
is funded. If the foreign
trust was prepared
by a qualified U.S.
tax lawyer, that individual
should be able to tell
if anyone is a current
trust grantor or could
become a trust grantor
due to provisions of
the trust agreement.
If the trust
is a boiler plate trust
prepared by a company
selling off-the-shelf
entities, then there
may be a need to consult
with a U.S. tax lawyer
to get an answer to
this question
If
you would like more
information regarding
asset protection, trusts,
family limited partnerships
or the subject of this
article please call
or email our office.
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