Discretionary Trust with Foreign Trustee


#1

I am hoping some forum members could offer some advice regarding the following set of facts:

Deceased passed away on the 30th June 2000. Will dated July 2000. Domiciled in England and Wales. No foreign assets.

Will included a Discretionary Trust. The assets to be included in the trust, as dictated by the Will, were the deceased’s 50% interest in her residence which is occupied by surviving spouse and 25% interest in second property which is occupied by one of the other co-owners.

Trustees were surviving spouse and other co-owner of second property. Due to age the existing Trustees wish to appoint 2 additional Trustees - the deceased’s two children. They are not intending to retire at the moment. One of the additional trustees lives in the US and has done for many years. The other lives in the UK.

Can anyone confirm if there should be concerns from a tax point of view of having the child who lives in the US as one of the Trustees.

Thank you in advance for your help.

KATE HANDEL
Harrisons Solicitors LLP


(andrew.goodman) #2

Should not be any UK tax problems but you could be creating all sorts of interesting US reporting issues to add to those of having a US beneficiary. I would not proceed unless or until you take some US advice.

Andrew Goodman
Osborne Clarke LLP


(John Cartlidge) #3

“Deceased passed away on the 30th June 2000. Will dated July 2000”

Not being clever, but did you mean the other way about?

John Cartlidge
Campion Solicitors


(PETER DOUBLE) #4

I agree with Andrew Goodman. There are a host of reporting documents for the US resident (I assume a child of the deceased, and who also is a US permanent resident (Green Card holder) and who still holds a British passport). This in turn means FATCA can come into play with additional reporting requirements not only if the US resident is a trustee, but also if the US resident is just a named beneficiary of the trust. Forms W-8BEN-E; 114; 8938; 8621; 5471; 8858 and 3520 & 3520-A spring to mind to be considered.
The UK Trust itself as it will have a US resident beneficiary, will also have to file Form W-8BEN-E at the very least.
If the trust in due time holds UK shares you may find that because of FATCA and the presence of a US beneficiary / trustee that some banks (and certainly some stockbrokers) will refuse to handle the Trust’s affairs because of the onerous FATCA reporting requirements.
This area of US tax law is a minefield and an expert is necessary (but even the experts are not always right, these days).
Peter Double / Probate Resealing Services.


(Julian Cohen) #5

It’s not quite as bad as Peter Double suggests, is it (or am I wrong)?

The mere existence of a US-resident beneficiary among a horde of discretionary objects does not mean that the trust has to report; it’s only when the beneficiary becomes a “beneficial owner” that his entitlement has to be reported [by the trust].

The FATCA reporting requirements only apply if a broker is retained on a discretionary basis, not if he is retained on an advisory basis.

The additional reporting requirements listed in the first paragraph may well apply, for all I know, but are not a burden to the trust administrators.

Julian Cohen

Solicitor


(PETER DOUBLE) #6

Thanks for your input as to USA reporting. As I said, even the experts do not always get it right, and there are differences of opinion in the reporting requirements, so just to be safe I listed the more usual documents that should be considered.

As mentioned it is important that proper tax advice is taken as to the reporting requirements. We have our people that we use in the USA, and even they differ.

I have even heard of a UK trust that has no USA residents or citizens as beneficiaries, but owns USA assets, and that trust has reported under FATCA.

Peter Double / Probate RS