May 14, 2020

Grantor Trusts

Grantor Trusts

Foreign Investors: Using a U.S. Grantor Trust
      Mark A. Masek, 45(2): 539–75 (Feb. 1990)
This Article argues that a "cash rich" foreign investor should consider using a grantor trust to acquire a U.S. business or U.S. real estate. By using a grantor trust in conjunction with a foreign corporation, a foreign investor can shelter the U.S. earnings with tax-free interest paid to himself. This strategy should enable foreign investors to avoid the thirty-percent withholding tax that would normally be imposed upon this interest. In addition, the strategy should minimize any U.S. estate tax in the event of the foreign investor's untimely death.