Foreign trust tax planning and asset protection using the IRS blueprint

saving taxes, how to save taxes, tax planning,

Saving taxes by requesting a private letter ruling from the IRS National Office.

The IRS has a new blueprint on foreign trust tax planning and asset protection.  And it is very good!

The IRS issued a legal memorandum providing the blueprint for protecting assets and saving taxes. 

The tax advantage of a foreign trust is its classification as a “grantor trust.”  This tax plan uses a special asset protection section of the tax code, section 679.

Unlike a domestic trust, all assets transferred to a foreign trust are allowed “grantor trust” status (with one tax planning exception explained below).  They are also excluded from the taxable estate of the settlor.

As a “grantor trust,” the tax law allows the transfers of assets to the trust to be income tax-free.  Thus, you can do what you want to protect your assets and reduce estate taxes without worrying about income taxation.  

Foreign trust tax planning and asset protection is important for the small business owner.

This IRS blueprint on foreign trust tax planning is the explained in this episode of my radio show, Tax Talk below.

The play time is about 22 minutes. If you would like to see how a foreign trust fits into your business, then contact me, Brian Dooley, CPA,MBT at [email protected].

you want to defer income taxes, then fund the foreign trust with a loan due within five years.  

Such a loan is called a “qualified obligation.”  This makes the trust a tax deferral vehicle. The tax deferral can last for more than a century.  This type of a trust is named “non-grantor foreign trust.” 

The IRS Form 3520-A (filed by the trustee) details the tax planning structure for a tax-deferred foreign trust.  You will want to use the “qualified obligation” found on page 3 of the Form 3520 (filed by the settlor).   Learn more about this form on this link.

If you would like to discuss your questions about a foreign offshore trust, then send me, Brian Dooley, CPA an email at [email protected] or get my book (on this link) to learn how Nat King Cole designed his foreign trust (and beat the IRS in the Tax Court).