A Granny Trust or a Foreign Grantor Trust may be considered among other estate planning tools when facing complexities arising from cross-border wealth transfers.
Enterprising global families are increasingly looking beyond their homeland’s borders in search of more opportunities to build and protect their wealth and legacy. According to the 2023 Wealth Report by Knight Frank, investments by ultra-high-net-worth individuals (UHNWIs) are progressively more diverse – both by geography and asset class, devoting over a fifth of their investable wealth in commercial property and in assets overseas.
But holding international assets may complicate generational wealth transfer as tax and estate planning become complex across borders. However, some of the complexities that arise from cross-border wealth transfers may be mitigated using trust structures.
A trust is a legal relationship created when the settlor or grantor transfers ownership of certain assets to a trustee, which can be another person or a company. These assets are held by the trustee for the benefit of beneficiaries. The trustee has a fiduciary duty to manage and administer trust assets in the best interests of the beneficiaries.
Non-residents in the U.S. or Canada who have beneficiaries that live in those countries have access to trust structures such as a Foreign Grantor Trust (U.S.) and a Granny Trust (Canada), which may help your heirs preserve family wealth for future generations.
When it comes to managing wealth across borders, you – and a wealth advisor familiar with your circumstances – should consider both onshore and offshore implications.
It is important to remember that adding new jurisdictions to a transaction means dealing with multiple sets of laws. Jurisdictions will consider different factors such as the law of domicile (where the settlor or grantor lived), where the assets are located and where the beneficiaries reside. What this may mean is that the assets in your estate may be taxed by the government, including assets located in a different jurisdiction, which may mean less for your beneficiaries.
Working with a global bank and advisors who understand the nuances of the international nature of your family may help smooth out the process to support legacy protection.
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