Grantor Trust Agreement Foreign Beneficiary
Description
How to fill out Grantor Trust Agreement Between Credit Suisse First Boston Mortgage Securities Corp., Washington Mutual Bank FA And Bank One, National Assoc.?
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FAQ
A foreign grantor trust is considered both a foreign trust and a grantor trust. Neither the trust nor the settlor is subject to U.S. income tax on non-U.S. trust income while the settlor is alive unless the trust holds U.S. situs assets at the settlor's death.
Interest income earned by the trust is deductible if distributed to a foreign beneficiary but because the beneficiary is a nonresident alien, he will not be subject to U.S. income tax on the distribution. Therefore, the income is not subject to withholding tax (see Rev. Rul.
In addition to the withholding requirement, naming a beneficiary who resides in a foreign country may allow the foreign country to tax the property and accounts of the trust. In most cases, a foreign person is subject to US tax on its US source income.
A Foreign Grantor Trust is a common type of trust that the grantor controls on behalf of the beneficiary. This is in comparison to a non-grantor trust, in which the original grantor may no longer have control over the trust (direct or indirect), absent some very creative planning.
Form 3520 must be filed by the due date (including extensions) of the individual's Form 1040. The US owner must attach to a copy of the ?Foreign Grantor Trust Owner Statement? received from the Trustee to Form 3520.