A Client-Centered Analysis
by Michael W. Galligan
Major differences flow from a trust being a U.S. trust rather than a foreign trust. It is necessary to understand these differences to best advise foreign or U.S. persons who wish to create trusts.
The Small Business Job Protection Act of 1996 (SBA '96) amended the Internal Revenue Code (IRC) regarding the tax treatment of U.S. grantors and U.S. beneficiaries of foreign trusts (please see endnote 1), and fundamentally altered the place of foreign or offshore trusts in U.S. estate planning. ("Foreign" or "offshore trusts," as used in this article, refers to trusts that do not have situs in a U.S. state or the District of Columbia.) It also dramatically increased the reporting that is required of most U.S. grantors and U.S. beneficiaries of offshore trusts, and introduced severe penalties for failure to conform with these requirements. SBA '96, therefore, substantially modifies the considerations that must be taken into account in
