US Trusts with Foreign Beneficiaries

If you are a non-US person receiving income from a US trust, it may be part or all US tax-free and it may also be part or all tax-free in the country within which you reside. Whatever portion the US taxes, the other country will reduce or eliminate their tax. Whatever portion the other country taxes, the US may reduce or eliminate theirs. The trust needs to be informed of your your legal status in the US with a Form W8-BEN which will allow them to apply the appropriate treaty rate of withholding.

When a US trust has a foreign beneficiary, the trust must file Series 1042 forms, and withholding may be necessary. We can help you determine what treaty benefits, if any, your beneficiaries are subject to.

If an American dies abroad, and a trust is set up as part of their will, it may be a US trust for US tax purposes. Care must be taken to ensure the estate takes any US tax obligations of such a trust into consideration when settling the estate.