Article on Foreign Trusts & U.S. Tax Implications

Alice Rokahr & Maggie Cockburn recently published an Article entitled, Foreign Trusts and U.S. Tax Implications, 61 S.D. L. Rev. 420 (2016). Provided below is an abstract of the Article:

This article focuses on both the exposure of non-U.S. persons to the U.S. transfer and income tax systems, as well as the U.S. tax treatment of the bequests and trusts that non-U.S. persons leave for their beneficiaries. This article also demonstrates some of the ways in which the rules can work to the benefit or detriment of U.S. and non-US. persons for estate planning purposes. This article explains certain threshold tax concepts that are key to understanding how the U.S. taxes individuals. This article discusses how the U.S. classifies trusts as foreign or domestic, the U.S. tax implications of grantor and non-grantor trusts, and how the U.S. gift and estate taxes can affect individuals who are neither citizens nor residents of the U.S. This article also explains why a foreign settlor may wish to include a U.S. trust as a part of their tax and estate plan. Finally, this article includes case studies illustrating the application of the rules discussed.