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Tax compliances for U.S. trust with Canadian beneficiaries

I am planning to set up an irrevocable trust with both U.S. and Canadian beneficiaries. My current intention is that, upon my death, specified funds for the U.S. beneficiaries would be disbursed to them. The remaining funds will stay in the trust for the Canadian beneficiaries.

The question is U.S. and Canadian tax compliance requirement after I die. I hope there is a way to set it up so that trust returns need only be filed for either U.S. OR Canada, but not both -- with the trust continue to be in the U.S.** Is that possible?

  1. Based on current legislation, is there a requirement for a U.S. trust, with a non-Canadian settlor, to file Canadian tax returns for the Trust -- if there is no distributions to Canadian beneficiaries?

  1. If all beneficiaries at that time are Canadians, does a U.S. trust need to file a tax return. [Trust income can be distributed annually, if necessary. Preference is to capitalize the income and stay in the trust until a certain age.]

  2. etc., etc.

I know I need a lawyer; and I can go to lawyers.com or other lawyer database to search for one with both U.S. and Canadian experience. But that is usually not the best way to find a good one.

** P.S. The reason for that it is difficult to find Trust Company to handle smaller trust; and the Canadian beneficiaries do not have the savvy to find one. If I am wrong in the assumption of ease of finding a suitable trust company in Canada, I am willing to re-evaluate.
Reply to
Not A Clue
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Why in the world do you want to do that? Irrevocable trusts are only set up in very specialized situations. And since you say your trust is not a large one, it is highly unlikely that an irrevocable trust would be either what you need or good for you.

Reply to
Stuart O. Bronstein

Even if the trust is revocable during my lifetime, doesn't it become irrevocable after my death? And my question relates to tax compliance after my lifetime.

Reply to
Not A Clue

If it's after your death, why are _you_ worried about compliance? Seriously, the present requirements are only a vague indication of what the requirements will be at your death. The alternate trustee will need to contact a tax preparer _then_.

Reply to
Arthur Rubin

Good points, but anyone who sets up a trust and leaves a lot of the thinking to the beneficiaries after his death is not doing anybody any favors.

Reply to
Taxed and Spent

That's true. But OP clearly has no idea what he's talking about, and asking questions without understanding that there is no one-size- fits-all answer because the answer will depend on a number of factors he neglected to mention.

To answer his specific questions:

  1. Taxation has nothing to do with where the settlor is located, but where the trustee and the trust assets are located. Any response to this question cannot be made without knowing those facts.

  1. Again, taxation depends on where the trustee and the trust assets are located. But if the trust is irrevocable and either the trustee or any trust assets are located in the US, the trust will probably have to file US tax returns even if all beneficiaries are Canadian.

Reply to
Stuart O. Bronstein

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