Why GST Tax is Relevant for Non-US Trusts

Non-U.S. families establishing succession planning structures rarely think about the U.S. generation-skipping transfer (GST) tax. Nevertheless, when a foreign trust becomes a U.S. domestic trust so that distributions can be made in a tax-efficient manner to the settlor’s U.S. grandchildren and more remote descendants, U.S. trustees or tax return preparers may raise questions about whether those distributions are subject to the GST tax. Advisers to these families should become familiar with the application of the GST tax rules in order to bring clarity to the situation.