Basics of a Foreign Non-Grantor Trust & US Beneficiary
Channel: Esquire Group
Date: 2020-05-21

A Foreign Non-Grantor Trust is basically a foreign trust that was set up by a foreign person/non-US grantor or settler. And it is possible for a US beneficiary, of that trust, to be taxed, even though they did not receive a distribution.

Usually, when you have a Foreign Non-Grantor Trust with a US beneficiary, that beneficiary doesn’t have to pay tax, until/unless they receive a distribution. And because non-distributed assets remain in the name of (owned by) the trustee/trust, the US beneficiary does not have to pay taxes on them. Now, when those assets generate income, tax obligations (income tax) are applied. Additionally, because the assets remain in the name of the trustee when the US beneficiary passes on the assets to their heirs, they will not be taxed (US estate gift tax) on the assets either. 
 
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