Offshore Asset Protection Trusts and FBAR Reporting

We again remind readers that FinCEN Form 114 (formerly TD 90-22.1), the Report of Foreign Bank and Financial Accounts (the “FBAR”), for calendar year 2013, is due by June 30, 2014.   The FBAR must be filed electronically.

As we wrote previously, in 2011, the U.S. Treasury Department changed the FBAR filing requirements to now apply to U.S. grantors of foreign trusts, and in some cases their U.S. beneficiaries.

The FBAR is required to be filed by a U.S. person who has a financial interest in, or signature or other authority over, any foreign financial account (including bank, securities or other types of financial accounts), if the aggregate value of the financial account(s) exceeds $10,000 at any time during the calendar year.  If you are subject to the FBAR filing requirement, the 2013 FBAR is due by June 30, 2014.

U.S. grantors (also known as settlors) of foreign asset protection trusts are deemed to be the owners of all trust assets for tax purposes.  Thus, the FBAR filing requirement applies to such grantors, whether or not they actually control trust assets and whether or not they receive distributions from the trust.

The 2011 revised regulations now extend the FBAR requirement to some U.S. beneficiaries of foreign trusts, including foreign asset protection trusts.  The new regulations apply to U.S. beneficiaries of a foreign trust who have a reportable financial interest in the trust.  A U.S. person has a reportable financial interest if the U.S. person had more than a fifty percent (50%) present beneficial interest in the assets of a trust or if the U.S. person received more than fifty percent of the income of the trust.  The beneficial interest in the assets of the trust must be a “present” beneficial interest for the FBAR to apply.  A beneficiary of a purely discretionary trust, i.e., where trust distributions are made solely in the discretion of a trustee (asset protection trusts created by this firm are purely discretionary trusts) does not have a “present” interest.  However, with respect to the trust income, a beneficiary who receives more than fifty percent of trust’s “current” (i.e., annual) income has a financial interest that is reportable on the FBAR.

Under prior FBAR regulations, there was ambiguity as to whether a discretionary trust beneficiary was subject to the FBAR.  Usually, beneficiaries of a foreign asset protection trust receive distributions at the discretion of the foreign trustee.  The new rules clarify that only a present beneficial interest gives rise to the FBAR and only beneficiaries who receive more than fifty percent of a trust’s current income are subject to the FBAR.

Please also note the following with respect to the FBAR requirement:

  • Even if the trust account was closed during 2013, if the account existed at any point during 2013, an FBAR is required.
  • The requirement to file the FBAR exists irrespective of whether you filed new IRS Form 8938, Statement of Specified Foreign Financial Assets.  Please contact us for a copy of our memorandum regarding new Form 8938.
  • The June 30, 2014 deadline is the deadline for receipt of the FBAR by the Treasury Department.
  • Even if you have an extension for filing your tax returns, the 2013 FBAR is still due by June 30, 2014.  There are no extensions for the FBAR deadline.
  • The FBAR is now required to be filed electronically.

 We also take this opportunity to remind you again that foreign asset protection trusts also give rise to filing IRS Forms 3520 and 3520-A, as well as Form 8938.

 Having established an offshore asset protection trust to safeguard your assets from attack by creditors and litigants, it is crucial to preserve the integrity of the trust and to be in compliance with all IRS requirements.  Please contact us with any questions.

2013 Year End Notes, Part 4: Asset Protection Considerations

Asset Protection for Financial Professionals, Hedge Fund Managers and Investment Advisors

During 2013, we have seen the growth of a new group of clients interested in asset protection: investment advisors, hedge fund managers and other financial professionals.  This group is faced with an increase in lawsuits brought by litigious investors against their financial advisors and those charged with making investment decisions.  As investors seek to blame others for investment losses, they are now suing fund managers and investment advisors personally, in addition to the fund itself or the advisor’s employer.  In the past, it was routine to sue the fund or financial institution; naming the fund manager or investment advisor personally is relatively new, but a phenomenon that we are seeing in increasing numbers. Continue reading

2013 Year End Notes, Part 3: Offshore Considerations

During 2013, the IRS and U.S. Department of Justice (DOJ) continued to successfully attack offshore banking “secrecy”.  The IRS’ success against UBS and other banks eroded Swiss banking secrecy, effectively ending “going offshore” to hide money from the IRS. Going offshore for asset protection from civil creditors, however, is still viable and effective, but must be tax-compliant. Continue reading

Everything You Wanted to Know about Antigua Private Foundations

Our senior partner Kenneth Rubinstein was the author of the International Foundations Act of 2007, passed by the Parliament of Antigua and Barbuda and enacted into law.  Kenneth also wrote Antigua’s International Trust Act and International LLC Act.

Kenneth has now authored the chapter on Antigua and Barbuda private foundations which is part of Private Foundations World Survey, edited by Johanna Niegel and Richard Pease, Oxford University Press, 2013.  The chapter contains detailed information on Antigua as an Offshore jurisdiction, Antigua’s foundation law, foundation governance, asset protection issues, taxation issues, as well as discussion on issues of forced heirship and divorce.

For additional information, please see:

Antigua Asset Protection Laws Drafted by Rubinstein & Rubinstein Become Effective

Author of Antigua Asset Protection Laws Clarifies Antigua’s Offshore Position

 

Contact our Asset Protection attorneys today regarding foundations and trusts,

Antigua and other offshore jurisdictions

Call (212) 888-6600 to schedule a consultation

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