US persons and American assets

The American dimension in international trusts

The presence of a US person among the settlors, beneficiaries or protectors of a trust, or the holding of American assets, fundamentally transforms the structuring and administration of the trust. The United States applies one of the most demanding tax and regulatory regimes in the world, with significant consequences for foreign trusts.

Ignoring or underestimating these implications can result in substantial tax penalties, double taxation and conflicts with American authorities. Specialised expertise is therefore essential whenever an American connection exists within the trust structure.

Tax issues for trusts involving US persons

The US Internal Revenue Code treats foreign trusts with particular rigour:

• Trust classification: the distinction between a "grantor trust" and a "non-grantor trust" is fundamental. A grantor trust is fiscally transparent: income is taxed directly at the settlor's level. A non-grantor trust is taxed as a separate entity with specific rules.
• Throwback rules: accumulated distributions from a foreign non-grantor trust to an American beneficiary are subject to throwback rules, which apply an enhanced tax rate to compensate for deferred taxation.
• Reporting obligations: US persons involved in a foreign trust (settlors, beneficiaries, transferors) must file Forms 3520 and 3520-A with the IRS. Penalties for failure to report are severe (35% of the gross value of assets or the amount of transfers).
• FBAR: financial accounts of the trust in which a US person has an interest or signature authority must be reported via FinCEN Form 114 (FBAR).

FATCA: obligations for the trustee

The Foreign Account Tax Compliance Act (FATCA) imposes specific obligations on the trustee administering a trust with an American connection. As a Swiss trustee, Swiss Trustee is subject to the FATCA intergovernmental agreement between Switzerland and the United States, which entails adapted due diligence and reporting procedures.

The trustee must identify US persons among the settlors, beneficiaries and persons exercising control over the trust, classify the trust according to FATCA categories and make the required declarations to Swiss tax authorities for transmission to the IRS.

Structuring strategies

Several approaches allow the American complexity to be managed effectively:

• Segmentation of structures: creating separate trusts for American and non-American beneficiaries, with rules and assets tailored to each tax regime.
• US domestic trust: in certain cases, establishing a US domestic trust for US beneficiaries is more efficient than a foreign trust, as it avoids throwback rules and simplifies reporting.
• Grantor trust election: structuring the trust as a grantor trust can simplify the tax position by making the trust transparent, provided the settlor is willing to bear the tax on trust income.
• Coordination with American advisers: we systematically work in coordination with US tax attorneys and CPAs to ensure full compliance.

Our US expertise

Swiss Trustee has specific expertise in trusts involving US persons, developed over years of working with international families that include American members. Our approach combines Swiss regulatory rigour (FINMA, AML) with a deep understanding of American requirements (FATCA, IRS reporting, trust classification). We coordinate our work with a network of US tax specialists to guarantee full compliance in both jurisdictions.