Sign Up

Why sign in to the Community?

  • Submit a question
  • Check your notifications
or and start working on your taxes
cancel
Showing results for 
Search instead for 
Did you mean: 
ZDR_ZDR
Level 2

Minors are beneficiaries of an overseas (UK) trust. Tax implications?

I am a US citizen, and I have 2 daughters under age 10 (also US citizens). My parents are UK citizens and live abroad. They are setting up a trust which allows them to gift a certain amount each year to chosen beneficiaries. They are looking into gifting my 2 daughters a certain amount (around $15k) annually, but we are unsure of the tax implications.
 
Would this count as a gift, and thus untaxed? Or would it count as earned/unearned income, and thus potentially have a tax burden?
4 Replies
tagteam
Level 15

Minors are beneficiaries of an overseas (UK) trust. Tax implications?


@ZDR_ZDR wrote:
Would this count as a gift, and thus untaxed?

It would be a gift and not subject to federal income tax. Under certain circumstances, a Form 3520 might be required to be filed.

 

See https://www.irs.gov/instructions/i3520#idm139776174455584

ZDR_ZDR
Level 2

Minors are beneficiaries of an overseas (UK) trust. Tax implications?

Thank you!

 

Couple of follow up questions here:

1. Since they are minors, if I do need to file Form 3520, do I have to file on their behalf?

2. If the Trust is co-owned (apologies for loose terminology) by both grandparents, is the limit to not having to file double the ~15k? I.e. can they receive that amount from each grandparent, bringing the total to ~30k?

 

Thanks again!

tagteam
Level 15

Minors are beneficiaries of an overseas (UK) trust. Tax implications?

1. Yes, you would file on their behalf (as their representative).

 

2. The annual gift tax exclusion is per person, per donee. So an individual can gift up to $15,000 (during the 2019 tax year) to a specific donee. Thus, two parents (grandparents or whatever) could give up to $30,000 to each of their children (i.e., $15,000 from each parent) without having to file a gift tax return or otherwise pay gift tax on that amount. Note that the gifts should be separate, not commingled.

ZDR_ZDR
Level 2

Minors are beneficiaries of an overseas (UK) trust. Tax implications?

Thank you!

Dynamic AdsDynamic Ads
Privacy Settings
v