Avoiding Foreign Trust Throwback Tax on Distributions to U.S. Beneficiaries From Undistributed Net Income
DNI and UNI Rules, Structuring Foreign Subtrusts, and Strategies to Defer Accumulation Tax
Note: CPE credit is not offered on this program
Recording of a 90-minute CLE webinar with Q&A
This CLE course will provide estate planners and fiduciary advisers with a practical guide to navigating "the throwback tax" on distributions from foreign trusts to U.S. beneficiaries. The panel will define undistributed net income (UNI), detail the reclassification process, and offer specifics on avoiding the costly tax on the accumulation of undistributed income by a U.S. owner or beneficiary of a foreign trust.
Outline
- Default U.S. tax treatment of foreign non-grantor trusts with U.S. beneficiaries
- Throwback tax rules on distributions from UNI to U.S. beneficiaries
- Filing requirements and tax calculations
- Calculating tax
- Form 1040 Schedule J
- Form 4970
- Interest charges an penalties on UNI accumulation
- Strategies to access principal and avoid or defer accumulation tax on distributions from UNI
- Structuring foreign subtrusts to receive distributions
Benefits
The panel will review these and other key issues:
- Identifying income that must be treated as UNI
- Tax treatment of distributions made out of UNI to a U.S. beneficiary
- Structuring foreign sub-trusts to serve as beneficiaries to make trust-to-trust transfers to avoid triggering of accumulation/throwback tax
- Tax and other risks involved in using foreign sub-trusts to remove UNI from a primary foreign trust
Faculty
Kirsten Burmester
Member
Caplin & Drysdale
Ms. Burmester's practice focuses on international tax issues, including both planning and controversy work. She has... | Read More
Ms. Burmester's practice focuses on international tax issues, including both planning and controversy work. She has extensive experience advising high net worth individuals on international taxation issues, including advising foreign individuals on structuring investments into the U.S., and advising U.S. individuals on the U.S. tax implications of offshore investment and estate planning structures. She advises businesses on international taxation issues
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Lucy S. Lee
Shareholder
Greenberg Traurig
Ms. Lee focuses her practice on international tax and estate planning for individuals and families. She represents high... | Read More
Ms. Lee focuses her practice on international tax and estate planning for individuals and families. She represents high net worth and global clients on a wide range of sophisticated matters, including inbound and outbound investments (including anti-deferral regimes and tax treaties), family wealth preservation, succession planning (including use of domestic and foreign trusts), tax compliance in the cross-border context, and pre-immigration tax and expatriation tax planning. She also advises funds and foreign financial institutions on U.S. tax and compliance (including FATCA), and represents taxpayers in administrative controversies with the IRS and in competent authority proceedings.
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