Statement of Overseas Assets and Grantor Trust

[Peanuts]

I do not have overseas assets directly in my name that meet the 50¥ Million reporting requirement, however I have a US Land trust to hold some real estate and a living trust for the rest of my assets. Combined they meet this threshold. I am the beneficiary of these trusts. Am I still required to fill out the Statement of Overseas Assets?

[RetireJapan]

My understanding is that Japan largely ignores trusts. Might be worth asking the tax office or a zeirishi.

[TokyoWart]

Like RetireJapan I have been told that Japan disregards trusts. What that means is that you report your share as your asset; the assets can't hide behind the trust. Trusts come in all kinds of varieties and some are designed so that they are not funded until someone else dies; in that case the trust is currently empty and you have nothing to report. Also if your parents created a living trust (a revocable trust) via which they plan on leaving stuff to you, that's still a trust they can change and you don't have a claim to the assets yet, but if you created a living trust to manage your foreign assets they are still your reportable assets. A Grantor trust (just a type of revocable living trust) is still the Grantor's asset for income tax and estate tax purposes. This is the understanding I took away from the consultations I had to go through several years ago when we were first dealing with that form.

[captainspoke]

See this thread, and then the link within it. The user "starkimpossibility" is well-known there, and to my knowledge has never given incorrect/unreliable information.

https://www.reddit.com/r/JapanFinance/c ... 3/juvhn9c/

My reading of it all (like the above) is that for japan, trusts do not put up any kind of a 'wall' between an asset and an owner.

If a trust says that the inheritor gets everything right away, then there may not be much of an issue. But if a trust says something like, "The inheritor will receive 33% on their 30th birthday, 33% on their 35th birthday, and 34% on their 40th birthday (with the remaining amounts in each case not being in the control of the inheritor)," this is problematic, since japan will see that person as having inherited it all on their 30th birthday--and tax it accordingly.

Something I am unclear on, is whether this means a trust is completely useless. On the japan side, that seems to be the case when considering inheritance taxation and ownership of assets. However, given that/with that in mind, it may be that on the US/non-japan side there would still be some benefit(s) to a trust.

Trusts are often used in the US to avoid probate while directing assets to the specified inheritors, so if persons A, B, and C are named as future beneficiaries of a trust established by a parent, and only person A is in japan, the trust may still be useful in some practical/pragmatic way. Yes, japan would see the parent's assets as passing immediately to A, B, and C, but in one sense, that's what you want to happen--no (possibly long/extended) probate process, a very clear statement of where and how the assets are to be divided, and so on. So (a) avoid US assets being subject to probate--a good thing; and (b), a clear specification of the division of those assets (like a will), also a good thing.

So siblings B and C, not in japan, would certainly benefit from their parent's estate planning and trust. Child A would, too, in the sense that the assets are divided per the parent's wishes. But A (being here in japan) would have to declare the inheritance according to the rules here, and not according to US trust law--the trust is 'seen through', i.e., what is the substance of what is happening, and then A would declare that, according to the rules in japan, pay (or not) taxes, and so on.

Tho beyond my knowledge, a parent's trust in the US with a beneficiary here might still shield/protect the parent's assets against certain claims against the parent there.

[captainspoke]

I do not have overseas assets directly in my name that meet the 50¥ Million reporting requirement, however I have a US Land trust to hold some real estate and a living trust for the rest of my assets. Combined they meet this threshold. I am the beneficiary of these trusts. Am I still required to fill out the Statement of Overseas Assets?

Short answer, yes. (and as they say on the internet, IANAL) In essence, in substance, you do own the land and whatever else may be in the trust.

But, as in my reply above, tho japan sees these things as yours, having them in trust there may still be useful/advantageous--they still provide the legal shielding there that trusts are designed for (according to US rules).

[Peanuts]

Thank you for the responses.