Matthew Ledvina's multi-pronged approach to navigating the U.S. throwback rules suggests it's more than just knowing the tax rules; it’s about converting that tax know-how into strategies that align with the trust's and beneficiaries' objectives. Through keen planning and the adept use of various vehicles and structures, the financial repercussions of these rules can be significantly reduced.

1. Introductory Remarks
01
02
03
The Lay of the Land: Understanding the
Framework
Timely Interventions: When to Act
Mastering Distributions: A Double-Edged
Sword
Final Thoughts
For U.S. beneficiaries of foreign trusts and those advising them,
the shadow of the U.S. throwback tax rules is often ever-present
and ominous. While many view these rules as a Gordian knot of
complexities, Matthew Ledvina offers a blueprint for actionable
solutions. This is not just a textbook overview but a practical
guide for implementing strategies that work in the real world.
The throwback tax rules of the U.S., ensconced within sections
665-669 of the Internal Revenue Code, apply largely to foreign
non-grantor trusts with U.S. beneficiaries. These rules tax
deferred income when it is eventually distributed, often at
punitive rates, and with interest penalties.
The ideal juncture to sidestep the hazards of the throwback
rules generally emerges when a foreign trust transforms
into a non-grantor trust. This often occurs at the death of
the original settlor. This transitional phase provides a golden
opportunity to reset the tax strategies of the trust.
Tax Liabilities: Directly distributing DNI to beneficiaries can
magnify their estate tax burdens.
Life Considerations: Beneficiaries could be underage, or
perhaps grappling with creditors or legal troubles, making
annual distributions risky or impractical.
The most direct way to sidestep the throwback tax is through the
current distribution of the trust’s Distributable Net Income (DNI).
However, this opens up a Pandora’s box of complications:
1.
2.
Matthew Ledvina's multi-pronged approach to navigating the U.S.
throwback rules suggests it's more than just knowing the tax rules;
it’s about converting that tax know-how into strategies that align
with the trust's and beneficiaries' objectives. Through keen
planning and the adept use of various vehicles and structures, the
financial repercussions of these rules can be significantly reduced.
H T T P S : / / W W W . F A C E B O O K . C O M / M A T H E W L E D V I N A /
04
05
By: Matthew Ledvina, JD, LLM in US Taxatoin