Foreign Grantor Trust Beneficiary Statement (Form 3520-A) Explained

Foreign Grantor Trust Beneficiary Statement (Form 3520-A) Explained

What is a Foreign Grantor Trust Beneficiary Statement (Form 3520-A)

Foreign Grantor Trust Beneficiary Statement: The Foreign Grantor Trust Beneficiary Statement is part of the Form 3520-A, which is required for certain US Persons — but is not always required by the filers of Taxpayers with Foreign Trusts. Rather, the Foreign Grantor Trust Beneficiary Statement is required in certain circumstances when the US beneficiary receives a trust distribution. It is important to note that the distribution need not be a “direct” distribution — and may include US Beneficiaries who receive direct or indirect distribution. Let’s review the basics of Foreign Grantor Trust Beneficiary Statement

About the Foreign Grantor Trust Owner Statement

This form is required by the Trustee of the foreign trust, to provide the IRS with information as to which US Beneficiary received a foreign trust distribution. As provided by the Form:

• • • • • “Trustee (or U.S. owner if a substitute Form 3520-A) must prepare a separate statement for each U.S. beneficiary that received a distribution from the trust during the tax year and include a copy of each statement with Form 3520-A. Trustee is also required to send to each such beneficiary a copy of the beneficiary’s statement.

        • Each U.S. beneficiary must attach a copy of its statement to its Form 3520.”

Important Tip: Even if the Trustee does not provide the IRS with the  Foreign Grantor Trust Beneficiary Statement, the U.S. owners is still required to provide the information to the IRS. And a separate statement is required for each US Person Beneficiary who receives a distribution from the Trust. In addition, the Trustee must provide a copy of the Statement to the Beneficiary — who must include it on their own Form 3520 (to report the trust distribution)

Required Information in the Foreign Grantor Trust Statement

Let’s take a look at the different parts to the Foreign Grantor Trust Owner Statement 

Part 1: What is the Name of Foreign Trust?

• • • Name of foreign trust

    • EIN

    • Number, street, and room or suite no.

    • If a P.O. box, see instructions.

    • Date foreign trust was created

    • City or town

    • State or province

    • ZIP or foreign postal code

    • Country

Part 2: Is there a US Agent 

• • • Did the foreign trust appoint a U.S. agent (defined in the instructions) who can provide the IRS with all relevant trust information?

      • If “Yes,” complete lines 3a through 3g.

      • If “No,” do you agree that either the IRS or the U.S. beneficiary can inspect and copy the trust’s permanent books of account, records, and such other documents that are necessary to establish that the trust should be treated for U.S. tax purposes as owned by another person?

Part 3: Name of US Agent

• • • Name of U.S. agent

    • TIN

    • Number, street, and room or suite no.

    • If a P.O. box, see instructions.

    • City or town

    • State or province

    • ZIP or postal code

    • Country

Part 4: Foreign Trust’s Trustee

• • • Name of Trustee

    • TIN

    • Number, street, and room or suite no.

    • If a P.O. box, see instructions.

    • City or town

    • State or province

    • ZIP or postal code

    • Country

Part 5: Foreign Trust Tax Year

• The first and last day of the tax year of the foreign trust to which Form 3520-A applies

Part 6: Name of Beneficary

• • • Name of U.S. beneficiary

    • TIN

    • Number, street, and room or suite no.

    • If a P.O. box, see instructions.

    • City or town

    • State or province

    • ZIP or postal code

    • Country

Part 7: What were the Cash or Equivalent Amounts

• • • Cash amounts or FMV of property that during the current tax year was

      • (1) distributed directly or indirectly to a U.S. person whether or not the U.S. person is designated as a beneficiary of the trust,

      • (2) loaned (exclude loans treated as qualified obligations) directly or indirectly to the U.S. person who is a beneficiary of the trust or a U.S. person related to that U.S. person, or

      • (3) used by the U.S. person who is a beneficiary of the trust or a U.S. person related to that U.S. person without compensating the trust for the FMV of the use of the property within a reasonable period of time. (See the instructions for Part III of Form 3520 for U.S. tax treatment of these amounts.)

Part 8: Foreign Grantor Trust & US Tax Law

• • • Attach an explanation of the facts and law (including the section of the Internal Revenue Code) that establishes that the foreign trust (or portion of the foreign trust) is treated for U.S. tax principles as owned by another person

Part 9: Who Owns the Foreign Trust

Owner of the foreign trust is (check one):

• • • Individual

    • Partnership

    • Corporation

International Tax Law Specialist Team: Golding & Golding

Our firm specializes exclusively in international tax, and specifically IRS offshore disclosure, including help clients with late reporting of Forms 3520 and 3520-A and Form 3520 Penalty & Relief Procedures.

Contact our firm for assistance.