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# Foreign Trust
- URL: https://university.heavnn.io/glossary/foreign-trust/
- Published: 2026-10-12T07:35:00.000Z
- Updated: 2026-10-12T07:34:59.000Z
- Description: A Foreign Trust is a trust classed as non-resident, which under United States tax rules means any trust failing the court or control test.
- Author: Heavnn
- Tags: #glossary, #Import 2026-10-11 07:56

## What Is a Foreign Trust?

A Foreign Trust is a trust classed as non-resident, which under United States tax rules means any trust failing the court or control test.

*Also known as: Non-US Trust, Offshore Trust.*

## How Foreign Trust works

A Foreign Trust, under United States rules, is any trust for which a US court cannot exercise primary supervision over administration or for which US persons do not control all substantial decisions, so a single non-US trustee with decision power can make a trust foreign. Classification drives reporting: a US person who creates, funds or lends to a foreign trust generally files Form 3520, and US owners must ensure the trust files Form 3520-A. Under the grantor trust rules, a US owner is taxed on trust income, and section 679 can treat a US transferor as owner where the trust has a US beneficiary. Other countries classify trusts by their own residence rules, so one trust may be domestic in one system and foreign in another.

## Foreign Trust vs Foreign Grantor Trust

Unlike a Foreign Grantor Trust, which is one subtype taxed to its owner, a Foreign Trust is the broader residence classification covering both grantor and non-grantor arrangements.

## Example

Illustrative example: A US citizen living in Country A settles a family trust governed by Country A law, with a Country A trust company as sole trustee and US-resident children as beneficiaries. Because a non-US trustee controls substantial decisions, the trust is foreign for US purposes, and the funding generally triggers Form 3520 reporting.

## Common misconception

**Myth:** A trust created abroad under foreign law is outside US reporting if the settlor lives abroad.

**Reality:** A Foreign Trust with US settlors, owners or beneficiaries generally carries US reporting duties such as Form 3520 and 3520-A, regardless of where the settlor lives.

## Frequently asked questions

### What makes a trust a foreign trust?

Under US Treasury regulations, a trust is a Foreign Trust unless a US court can exercise primary supervision over administration and one or more US persons control all substantial decisions.

### Does a US person have to report a foreign trust?

A US person who creates, funds or lends to a Foreign Trust generally files Form 3520, and US owners must ensure the trust files Form 3520-A, subject to exceptions.

## Related terms

- [Foreign Grantor Trust](https://university.heavnn.io/glossary/foreign-grantor-trust/) — Subtype taxed to the owner under grantor rules
- [Trust](https://university.heavnn.io/glossary/trust/) — Underlying legal arrangement before residence classification
- [Non-Resident Trust](https://university.heavnn.io/glossary/non-resident-trust/) — Equivalent residence concept in non-US systems
- [US Person](https://university.heavnn.io/glossary/us-person/) — Defines who carries US reporting duties

## Related guides

- [Global tax reform and US digital nomads](https://university.heavnn.io/global-tax-reform-why-u-s-digital-nomads-should-care/) — US persons abroad facing foreign structure reporting

## Sources

- [eCFR, 26 CFR 301.7701-7 (Trusts, domestic and foreign)](https://www.ecfr.gov/current/title-26/chapter-I/subchapter-F/part-301/subpart-ECFR3b0b98e8b8db54a/section-301.7701-7?ref=university.heavnn.io)
- [IRS, Foreign trust reporting requirements and tax consequences](https://www.irs.gov/businesses/international-businesses/foreign-trust-reporting-requirements-and-tax-consequences?ref=university.heavnn.io)

*Last verified: 2026-10-08\. This entry is general information, not tax or legal advice; rules vary by country and change over time.*