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Should offshore trusts stay offshore – the long-term trust solution
Kozusko Harris Duncan
  • Private Client & Offshore Services
  • USA
  • 01 August 2019

The tax drag and unsatisfactory options to deal with accumulated income often result in moving an offshore trust to the United States and giving up the tax deferral. However, there is an alternative method, suitable for very long-term trusts, that takes an almost diametrically opposite approach. Rather than restricting the US beneficiaries to the value of the original trust capital and virtually giving up on future tax deferral, this method sacrifices the original trust capital to a final payment of taxes and interest (or a gift to charity) and tries to maximise the duration of the deferral.

Should offshore trusts stay offshore – the problems
Kozusko Harris Duncan
  • Private Client & Offshore Services
  • USA
  • 25 July 2019

US beneficiaries of foreign trusts are subject to a throwback tax regime and an interest charge when they receive distributions of accumulated income from the trust. To avoid these punitive payments, families often choose to convert or decant the trust to a US domestic trust. However, the easy answer may not be the best answer, as a trust that tries to rebound from an ill-considered move to the United States may face a tax on the way out – a toll charge that precludes returning offshore.

Family banks: personal commitment, accountability and multi-generational mentoring
Kozusko Harris Duncan
  • Private Client & Offshore Services
  • USA
  • 11 April 2019

Over the past decade, matriarchs and patriarchs of successful families have increasingly been concluding that their children are sufficiently provided for and have thus shifted the focus of their family's largess to a broader group of individuals by creating so-called 'family banks'. Such banks provide capital to that broader group of individuals for business ventures, public-spirited projects and knowledge in a way that fosters personal commitment, accountability and multi-generational mentoring.

US reporting: requesting IRS filing extensions
Kozusko Harris Duncan
  • Private Client & Offshore Services
  • USA
  • 28 March 2019

It is important for trustees of foreign trusts not to miss US tax filing deadlines or, if unable to file by the due date, to submit a request for an extension to file. Careful attention should be paid to where and how to submit the request, as procedures are not necessarily the same for all returns. This article sets out the various requirements that must be met by trustees of foreign trusts.

US reporting checklist for foreign trusts
Kozusko Harris Duncan
  • Private Client & Offshore Services
  • USA
  • 03 January 2019

Trusts classified as foreign for US tax purposes, whether established under the law of a US state or of an offshore jurisdiction, must review whether they have any US tax or information reporting filings to make in 2019 with regard to income earned and distributions made in 2018. This article provides trust officers and family advisers with a summary checklist.

Tax planning for US equities owned in a non-US trust structure
Kozusko Harris Duncan
  • Private Client & Offshore Services
  • USA
  • 20 September 2018

Keeping in mind US tax basis and estate tax issues while establishing and maintaining a succession planning structure can protect the estate of a non-US settlor from US estate tax and prove beneficial after the settlor's death where a branch of the family moves to the United States or a family member marries a US citizen. Recent changes to the US Tax Code have prompted some US tax advisers to suggest additional layers of entities to the structure, the additional cost and complexity of which may not result in substantial tax savings.

Establishing 'foreign' trusts in the United States
Kozusko Harris Duncan
  • Private Client & Offshore Services
  • USA
  • 24 May 2018

Trusts remain a flexible succession planning tool for families wishing to pass wealth to future generations in a responsible manner and can include philanthropic goals. The wealth-creating settlor wants to establish such a trust in a jurisdiction with well-established trust laws, a stable business environment, responsive and efficient trust officers and clearly stated comprehensive annual fees. When comparing jurisdictions, the United States should be included.

Overview (March 2018)
Kozusko Harris Duncan
  • Private Client & Offshore Services
  • USA
  • 05 April 2018

US citizens and US residents are subject to income, gift and estate taxes. Non-US persons are subject to tax on certain US income and property transfers. Advisers to international families must be able to recognise when a family member has come in contact with the US tax net and plan accordingly. This will often mean seeking advice from competent US tax counsel. Even if no tax is due, running the gauntlet of US reporting obligations requires specialised knowledge.

Completing and filing Form 5472 for foreign-owned US LLC
Kozusko Harris Duncan
  • Private Client & Offshore Services
  • USA
  • 01 February 2018

A limited liability company (LLC) created under the laws of a US state that is wholly owned by a single non-US person (a foreign-owned LLC) will be required to report transactions with its non-US owner and related parties to the Internal Revenue Service. Advisers to families with succession planning structures that use US foreign-owned LLCs should familiarise themselves with Form 5472 and determine whether the LLC has had any reportable transactions with its sole non-US owner or a related party.

Revised Forms W-8 clarify some FATCA issues – but not all
Kozusko Harris Duncan
  • Private Client & Offshore Services
  • USA
  • 30 November 2017

The Internal Revenue Service (IRS) recently released an updated Form W-8BEN-E and Form W-8IMY. Non-US entities should use these new forms when requested to certify their status under the Foreign Account Tax Compliance Act. Among other things, the new forms clarify confusion over which global intermediary identification number should be reported for the trustee of a trustee-documented trust.

Practical FATCA and CRS compliance for family trust structures
Kozusko Harris Duncan
  • Private Client & Offshore Services
  • USA
  • 07 September 2017

All over the world, financial institutions are collecting information on and reporting individuals associated with a family's succession planning trust structure. The family's interests are best served when the family office and professional advisers take a proactive approach to complying with the Foreign Account Tax Compliance Act and the Common Reporting Standard as they apply to each entity within the family trust structure.

US citizens living abroad still face US tax and reporting obligations
Kozusko Harris Duncan
  • Private Client & Offshore Services
  • USA
  • 04 May 2017

Particularly since the US presidential election, some US citizens have moved abroad and others are considering such a move. Tax professionals and trust officers worldwide are fielding questions from these individuals, and how to advise them depends on the particular individual's objectives. Regardless of the length of time spent living outside the United States, the US citizen must be advised to continue all annual US tax reporting.

Overview (April 2017)
Kozusko Harris Duncan
  • Private Client & Offshore Services
  • USA
  • 13 April 2017

US citizens and US residents are subject to income, gift and estate taxes. Non-US persons are subject to tax on certain US income and property transfers. Advisers to international families must be able to recognise when a family member has come in contact with the US tax net and plan accordingly. This will often mean seeking advice from competent US tax counsel.

US LLC owned by non-US person has US reporting obligation from calendar year 2017
Kozusko Harris Duncan
  • Private Client & Offshore Services
  • USA
  • 26 January 2017

Limited liability companies (LLCs) established under the law of a US state are classified by default as disregarded entities if they have only one owner. As such, these LLCs have generally not been required to file a US tax return. Beginning with tax year 2017, US domestic LLCs that are wholly owned, directly or indirectly, by one foreign person, are now required to obtain a US tax identification number and file an annual return reporting transactions between the LLC and its foreign owner.

Panama Papers and US initiatives to identify entity beneficial owners
Kozusko Harris Duncan
  • Private Client & Offshore Services
  • USA
  • 04 August 2016

The leaked Panama Papers highlighted the ways in which offshore companies and structures can be used to cloak the identity of beneficial owners, some of whom have used such entities to avoid paying tax in their country of tax residence. The Internal Revenue Service and US financial institutions will now begin gathering information to identify beneficial owners of certain entities in response to the heightened awareness of abuse resulting from the papers' disclosure.

FATCA documentation for US-based trusts
Kozusko Harris Duncan
  • Private Client & Offshore Services
  • USA
  • 28 April 2016

Even though a trust may be established under US state law and have a US trust company serving as trustee, this does not mean that it is a US domestic trust for income tax purposes. If non-US persons make substantial decisions for the trust, the US-based trust will be classified as a foreign trust under US tax law and, if it has accounts with financial institutions, it must provide certification of its status for Foreign Account Tax Compliance Act purposes.

Common Reporting Standard considerations for FATCA-compliant trusts
Kozusko Harris Duncan
  • Private Client & Offshore Services
  • USA
  • 04 February 2016

The Foreign Account Tax Compliance Act (FATCA) is in full swing. Just as international families and their advisers are getting used to myriad requests for FATCA Form W-8 certification forms, more than 90 other countries have indicated that they wish to address tax evasion through a global exchange of financial information by implementing the Common Reporting Standard which, like FATCA, will affect non-US trusts and their trustees.

Tax on gifts and bequests from covered expatriates
Kozusko Harris Duncan
  • Private Client & Offshore Services
  • USA
  • 03 December 2015

A certificate of loss of nationality addresses the immigration side of expatriation, but tax issues still remain. Certain 'covered' expatriates pay an exit tax on giving up their US citizenship. Although they themselves may have left the US tax net, there are lingering tax issues for any US family members. The Internal Revenue Service has now issued proposed regulations concerning the tax on certain gifts and bequests from covered expatriates.

Tax and information reporting requirements for US taxpayers living abroad
Kozusko Harris Duncan
  • Private Client & Offshore Services
  • USA
  • 01 October 2015

The Foreign Account Tax Compliance Act requires non-US financial institutions, including investment entities, to report US account holders to the Internal Revenue Service. This reporting is causing US taxpayers living abroad to consider whether they have been adequately filing their annual income and information returns in the United States.

The latest on Bureau of Economic Analysis reporting – Form BE-10
Kozusko Harris Duncan
  • Private Client & Offshore Services
  • USA
  • 02 July 2015

The Bureau of Economic Analysis has revised the form used to request an extension of time to file the BE-10 survey. The form no longer makes reference to the number of investments in foreign businesses to be reported by the US reporter. Thus, it is now more applicable to a small filer, such as a trust or limited liability company reporting only one foreign affiliate.

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