Both past and current places of residence, domicile and citizenship for each and every Grantor and Beneficiary of the Trust, and whether any change to the current status of the Grantor or Beneficiary is anticipated.

Whether the Trust is considered to be a Foreign Grantor Trust and/or a Non-Grantor Trust for US federal income tax purposes.

These types of tax consequences need to be considered on occasions in which there are (i) certain powers or rights in connection with the Trust or the entities owned by the Trust and conferred on the Grantor or the beneficiaries; (ii) transfers of property to the Trust whether direct or indirect, (iii) direct/indirect actual or deemed distributions or loans from the Trust and (iv) rights to potentially benefit from the Trust.

Trustees should consider how to administer the entities which the Trust owns in a tax-efficient manner. For example, how to deal with assets which appreciate and retained earnings, as well as when to make a “check-the-box election”.

Trustees should consider what changes need to be made to the Letter of Wishes; the Trust Deed; and/or any entities owned by the Trust to ensure that the Trust is structured in a manner that is tax efficient. As examples of the types of issues that Trustees need to be on the look out for: a “general power of appointment” of a US person; and the existence of a “step-up in basis” upon the death of the Grantor.

By conducting a due diligence along the lines outlined above, Trustees will be in a relatively good position to ascertain if there are any US taxation and reporting issues in the administration of their trusts.

This due diligence check list is merely a tool to assist Trustees in the administration of their trusts, but given the complexity of the issues highlighted above, will often require further analysis by qualified US Counsel. The attorneys at Helm are familiar with these issues and should be consulted in order to ensure that all relevant US issues are canvassed by Trustees in administering their trusts.

Trustees should consider which types of investment structures should be held directly by the Trust or indirectly through an entity.

Whether the Trust is considered to be a foreign Trust for federal tax purposes and the circumstances under which that may change.

Who, both currently and in the past, has been considered Grantor of the Trust and who, both currently or in the past, has been considered the owner of the assets of the Trust and under what circumstances that might change.

Trustees should consider to what extent they could be held liable for federal withholding tax or federal and state transfer taxes (for example, estate and gift taxes).

If a US person receives a distribution from a foreign trust, the distribution will have to be reported on the taxpayer’s Form 3520 and tax return statement called Foreign Grantor and Nongrantor Trust Beneficiary Statements. Those statements ensure that the distribution is properly taxed.