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Topic: US Trust Fund - UK Taxes?  (Read 1089 times)

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US Trust Fund - UK Taxes?
« on: June 23, 2008, 10:24:19 AM »
I'm US citizen living in UK with my US/UK dual citizen husband (born in UK, became US citizen, now back in UK).  His son, my stepson, is 15 and has a US trust fund that is soley his, but my husband is the trustee. Two people mention it is best if my husband renounce his status as Trustee and we find someone in the US to be trustee instead. Something to do with UK considering husband and stepson as UK citizens and then taxing the US Trust fund?   I'm looking for any good information on this, and I'm advised to find a US Trust Accountant to do the taxes for that.  I can't find anything when googling, so any recommendations is appreciated.


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Re: US Trust Fund - UK Taxes?
« Reply #1 on: June 23, 2008, 12:29:45 PM »
It is difficult o be brief, but there are several UK and US tax problens here already.

From a US tax perspective as the trustee is non-US resident you need a US attorney's opinion as to whether the trust remains under the jurisdiction of State law (this will need a lawyer familiar with the laws of the specific State where the trust is constituted.  If there is doubt this may already be a foreign trust requiring filing of forms 3520 and 3520A annually with the IRS (penalties for failure to file can be 35% of the assets of the trust).  As trustee, your husband has a duty of care that will require such an oinion.

From a UK tax perspective this is now a UK resident trust because the trustee is UK resident.  Consequently the trust needs to file annual UK trust returns with HMRC.  If the trustee resigns in favour of non-UK trustees than this would result in a deemed disposal of all of the asssets for UK tax purposes.  It would not eliminate past UK filings or remove this potential UK tax cost.  Again I would recommend a legal opinion to ebsure that the duty of trust is met.

Your stepson should also be filung UK returns to report the trust income (or distributions depending on the nature of the trust) and should then get credit for the UK tax payable by the trust.


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