Foreign nongrantor trust structures can offer truly Inspired ways to Reduce Tax.

But before we review the benefits of foreign nongrantor trust structures let’s share a message sent to me by a reader. The subject: is “I Wish You Enough.” And its makes a powerful point.

Foreign Nongrantor Trust Structures Story

“Recently I overheard a father and daughter in their last moments together. They had announced her departure and standing near the security gate, they hugged and he said, “I love you. I wish you enough.” She said, “Daddy, our life together has been more than enough. Your love is all I ever needed. I wish you enough, too, Daddy.” They kissed and she left.

“He walked over toward the window where I was seated. Standing there I could see he wanted and needed to cry. I tried not to intrude on his privacy, but he welcomed me in by asking, ‘Did you ever say good-bye to someone knowing it would be forever?’ ‘Yes, I have,’ I replied. Saying that brought back memories I had of expressing my love and appreciation for all my Dad had done for me. Recognizing that his days were limited, I took the time to tell him face to face how much he meant to me. So I knew what this man was experiencing.

“Forgive me for asking, but why is this a forever good-bye?” I asked. “I am old and she lives much too far away. I have challenges ahead and the reality is, the next trip back would be for my funeral, ” he said. “When you were saying good-bye I heard you say, ‘I wish you enough. May I ask what that means?’ He began to smile. ‘That’s a wish that has been handed down from other generations. My parents used to say it to everyone.’ He paused for a moment and looking up as if trying to remember it in detail, he smiled even more. ‘When we said ‘I wish you enough,’ we were wanting the other person to have a life filled with just enough good things to sustain them,’ he continued and then turning toward me he shared the following as if he were reciting it from memory.

“I wish you enough sun to keep your attitude bright. I wish you enough rain to appreciate the sun more. I wish you enough happiness to keep your spirit alive. I wish you enough pain so that the smallest joys in life appear much bigger. I wish you enough gain to satisfy your wanting. I wish you enough loss to appreciate all that you possess. I wish enough Hello’s to get you through the final Good-bye.”

Read below the foreign nongrantor trust structures point.
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More on foreign nongrantor trust structures

We just need enough in our tax planning as well so when we try to accomplish too much from our foreign nongrantor trust structures or any tax deferral or tax reduction plan, they start to fail. Enough is good. Too much is worse than none at all!

Foreign Nongrantor Trust Structures Law

Richard Duke (richard@assetlaw.com) wrote: “Gary Read the information below regarding capital gains of a foreign nongrantor trust. This comes from the St. Thomas University School of Law (Miami) Offshore and International Tax & E-Commerce Journal that is currently being published. When a U.S. person dies, the trust become a nongrantor trust; and if a foreign trust, then a foreign nongrantor trust. Please see the clear law about capital gains regarding foreign nongrantor trusts. Capital gains are included in the distributable net income of a foreign nongrantor trust, irrespective of whether capital gains are allocated to income or to corpus under the trust instrument or the governing law and irrespective of whether currently distributed. Thus, U.S. beneficiaries of a foreign trust (foreign grantor or foreign nongrantor) are taxed at such time as distributions are made. And, distributions of accumulated income (undistributed income which includes accumulated capital gains) are subject to the rules regarding taxation on accumulated distributions [throw-back rules] (interest and penalties on distributions of accumulated income).

Also, the foreign trust assets will be excluded from estate and generation-skipping transfer taxation (to the beneficiaries of the deceased settlor) only if the trusts are Exempt Trusts. (Exempt trusts: a current $1 million exemption is available–$2 million for the spouses.) Assets in a foreign testamentary trust not subject to the election to apply the exemption against GST taxes will be subject to both estate taxation and GST taxation.

The tax issues with respect to foreign testamentary trusts are very complicated (but caught when the tax returns are filed for U.S. beneficiaries receiving distributions–very serious consequences). Capital gains are taxable, so long as they are distributed in the year in which earned from the foreign nongrantor trust, to the beneficiaries. Capital gains, however, are treated as undistributed net income if accumulated; and, when the accumulated capital gains are distributed to U.S. beneficiaries, the distributions are taxed as ordinary income, not capital gains, and are subject to the throw-back rule (penalties and interest on distributions of accumulated income from a foreign nongrantor trust).

There are limitations on the amount that can be excluded from death and generation-skipping transfer taxation –currently $1 million or $2 million for a husband and wife. Any assets above these amounts will be subject to estate and generation-skipping transfer taxes when the children, for example, die.

Investors must beware of simple statements about complex tax issues that must be reported by the beneficiaries when receiving distributions may be misleading to the untrained public. International tax provisions are the most complex in the entire Internal Revenue Code.

Foreign Nongrantor Trust Structures Professional

Richard Duke is one of the most thorough and competent tax attorneys I know. His email is richard@assetlaw.com

Gary

P.S. Learn more about foreign nongrantor trust structures in the correspondence course International Business Made EZ at GaryScott.com

tax deferral  strategies

Real international business is fun and can bring tax advantages and asset protection. Gary and Merri Scott gain tax advantages as they enjoy developing their healing center in Ecuador

Foreign Nongrantor Trust Structures was written by Gary Scott August 12, 2002