​The Hsu Law Firm ​PLLC

International Trust & Estate

Non-U.S. Individuals with Children/Grandchildren in the U.S.

The U.S. offers one of the best higher education opportunities in the world, and as a result, there are many international students in the universities and graduate schools in the U.S.  Many choose to stay in the U.S. for love or for their career.  As a result, they also become U.S. tax residents, subject to both the IRS income tax reporting and the payment obligations.  In addition, they also become subject to the U.S. gift and estate tax (death duty) after they become domiciliaries in the U.S.

There are many options available to the non-U.S. parents or grandparents to transfer wealth to their U.S.-based family in a tax efficient manner, either by a direct gift or by establishing a trust for the benefit of the U.S. children/grandchildren.

A gift of cash (through wire transfers) or other intangible assets (stocks, bonds, etc.) from a non-U.S. donor is not subject to U.S. gift tax for the donor and is also not subject to any income tax for the U.S. child/grandchild.  However, because the gifts become the personal property of the child/grandchild, the property is subject to law suits, matrimonial claims and the U.S. estate tax.  A trust offers the solution to these issues.

A trust that is properly set up with the appropriate terms can allow the assets to grow inside the trust tax-free for the U.S. beneficiaries during the settlor's lifetime.  In addition, the assets inside the trust are not subject to U.S. estate tax at the death of any of the U.S. beneficiaries.  An additional benefit of the trust option is that the assets are generally not considered as personal assets of the U.S. beneficiaries - this allows for an additional level of protection at times of divorce or law suits against the beneficiaries.

How we can help - 

  • We help our clients create a new trust in the U.S. for their U.S. family.  We will prepare the trust deed, coordinate with the trustee, the settlor and other professionals to effect a smooth transaction.
  • If the proposed trust is to be settled out of the U.S., we work with the foreign local counsel to ensure that that the trust does not have adverse tax treatment in the U.S. for the U.S. beneficiaries.
  • If a non-U.S. trust is already in place, we can analyze its terms and advise on the U.S. tax treatment for the U.S. beneficiaries any corrective actions to be taken, if any.
  • We assist with the decanting the assets of a non-U.S. trust to a U.S. trust to avoid the very high level of U.S. income tax when a U.S. beneficiary receives a distribution from a non-U.S. trust that is funded from prior year's accumulated income.
  • We advise on the proper IRS disclosure requirements for both the trustees and the U.S. beneficiaries.