I know this issue has been raised many times on this board, and the comments have given me a pretty good idea of the tax issues/risks with being included in a US trust.
There seems to be a decent amount of advice that's essentially says "don't become a beneficiary to a trust", and there seem to be a lot of people who just don't do anything and hope it never becomes an issue.
I am a very compliant person and certainly don't want to take the latter approach, but I also want to avoid removing myself entirely from the respective trust. I wanted to ask if anyone had taken/considered any of the below approaches, and if there are any major red flags that come to mind. I understand it would be best to speak to an inheritance tax expert, but I think it would likely be hard to get something in writing from a lawyer here on this topic. For reference I have not resided in Japan for 10 years yet, and hold a table 1 visa.
So my understanding is:
Japan treats trusts as transparent structures, thus the moment you become a beneficiary of a trust, your allocable share of the trust assets are seen as being given to you at that moment. If this is before death, this would incur gift tax, if this event is triggered after death, it would incur inheritance tax.
Potential solutions?
Word the trust so that you cannot become a beneficiary so long as you are a resident of Japan – This was suggested by someone, but something about it sounds sketchy to me
Make yourself a beneficiary before residing in Japan for 10 years, i.e., make the gift before being here for 10 years, and the assets are then seen as belonging to you from a Japanese tax perspective – I do not know enough about trusts to know if this is even possible on the US side
Remove yourself entirely from the trust, let sibling have the entire inheritance – Obviously the most straightforward
by SteezusSupremus