Reason to Have Asset Protection Attorneys Preview Tax Filings for International Trusts Before it’s Too Late
International Wealth & Asset Planning Blog
Oct 18, 2018
Carl Linder, Esq.
We just closed a matter, where the U.S. Grantor of a foreign trust had filed or caused to be filed his 3520-As and 3520s in a timely manner for tax years ending in 2015, 2016, 2017. Unfortunately, those tax filings did not include complete information regarding the entire asset structure owned by the foreign trust. Many of the assets owned by the foreign trust were shown on the Grantor’s 1040 filing for those years but were not provided on the 3520-A or 3520. Subsequently, there was debate amongst the various professionals on the proper way to correct these errors. Ultimately, it was determined that amending all of the 3520-A and 3520s for those years was the proper course of action. Purely from an asset protection perspective, having the filings truly represent the foreign trust’s ownership of all assets would be valuable evidence in the event that it is argued that those assets belong to the Grantor individually, based upon past filings that were not correct. Part of the debate on the proper course of action was related to how the Internal Revenue Service would react to amended 3520-A and 3520 filings, which would show a much greater asset value being owned by the foreign trust. Eventually, it was determined that various statements and disclosures related to the true ownership of assets would be included with the amended 3520-A and 3520 filings. In the end, we all believed that reasonable cause would be available as a last resort in the event that the Internal Revenue Service attempted to levy penalties on the Grantor taxpayer. From this, the take away is to have a competent asset protection attorney that is familiar with these types of trusts, pre-screen drafts of all required tax filings for the trust structure. Please let us know if you would like us to work with your CPA to make sure that your tax filings are in full compliance.
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