How Are Foreign Trusts Taxed?
Channel: Esquire Group
Date: 2021-04-21

Jimmy Sexton goes into detail about how foreign trusts are taxed.
 
Determining what is and what is not a “foreign” trust can be difficult.
 
For example, a trust formed in the state of Wyoming in the USA can actually be considered a “foreign” trust for US tax purposes. This is due to certain US tax laws relating to a “court test” and a “control test.”
 
The result is that you have a Wyoming trust for state law purposes but a foreign trust for tax purposes.
 
A Wyoming trust provides other benefits like not being subject to a trust register, no beneficial ownership register (for trusts), and no common reporting standard. Plus, you can have a private trust company serve as the trustee.
 
Jimmy also discusses the two different kinds of foreign trusts – foreign grantor trusts & foreign nongrantor trusts.
 
Unfortunately for Americans, the IRS will consider the grantor of a foreign trust to be the owner of the foreign trust for tax purposes (not for purposes of legal title). As a result, they are required to pay tax on a foreign trust’s worldwide income.
 
Jimmy also discusses the very important and complicated trust reporting obligations – grantors, beneficiaries, and trustees might all have obligations.
 
Finally, stick around the see some “use cases” or examples of what kind of trust is best under certain circumstances.

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Jimmy Sexton, LL.M. is the Founder & CEO of Esquire Group. Jimmy founded Esquire Group with the objective of helping and inspiring wealthy families, investors, entrepreneurs, and high-level executives obtain and gain control over and protect their wealth, via strategic wealth planning. Jimmy started his career in 2003 and continues to service an elite group of clients. In 2005 Jimmy extended services to include tax preparation, which has evolved into Esquire Group’s exclusive Concierge Tax Service. 

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Esquire Group is not your typical international tax and wealth advisory firm; we are international business people and global citizens that strive to continue finding ways to provide value to our clients and enhance their lives, giving them peace of mind.