There are many professionals who are unprepared to handle the IRS reporting requirements for offshore asset protection trusts. The words “offshore trust” is a term of art that can include a foreign trust or a U.S. trust depending on the circumstances. This article discusses some of common reporting requirements that apply when the grantor (trust creator) is still living. It is important to understand the tax liability of the trust and how for U.S. tax purposes the classification of “grantor trust” means that the grantor reports and pays tax on all the trusts tax items. The grantor also needs to be sure to fill out the correct income tax form. If it is a foreign trust, then two information returns are required which include form 3520 and form 3520-A.
See Howard Rosen, The Basics of U.S. Taxation of Offshore Trusts, Wealth Management, March 9, 2016.
Special thanks to Jim Hillhouse for bringing this article to my attention.
