For years we have been writing that offshore asset protection trusts do not offer any income tax advantages for United States citizens or residents. Abusive trust arrangements are typically promoted by the promise of tax benefits with no meaningful change in the taxpayer's control over or benefit from the taxpayer's income or assets. These promised benefits are inconsistent with the tax rules applicable to trusts. Funds may flow from one trust to another trust by way of rental agreements, fees for services, purchase and sale agreements, and distributions.
Some trusts purport to involve charitable purposes.
In some situations, one or more foreign trusts also may be part of the arrangement. In the Notice the Service was able to classify abusive trust arrangements into five types, and further indicated that an abusive arrangement might involve some or all of the arrangements described. For example, the trustee may be the promoter, or a relative or friend of the owner who simply carries out the directions of the owner whether or not permitted by the terms of the trust. Often, the trustee gives the owner checks that are pre-signed by the trustee, checks that are accompanied by a rubber stamp of the trustee's signature, a credit card or a debit card with the intention of permitting the owner to obtain cash from the trust or otherwise to use the assets of the trust for the owner's benefit. The Business Trust .