I am a long-time lurker and big fan of the blog. I am fairly frugal and due to reach financial independence in the next few years from my own savings.
I am a UK citizen, currently living in the US on a green card. I recently had the surprising news that I am the beneficiary of a trust back home in the UK, and that in the next year or so I am due to receive a significant amount of assets from the trust (comparable to my FI amount). This is incredibly lucky on my part - I really did nothing to deserve this money, and to be honest I am glad I didn't get in (or learn of its existence) when I was younger as it would likely have had a negative effect on me. At this stage however, I hope that I can be a good steward of this money, and eventually use it to help others.
After learning about this trust, I did some reading and found out that in addition to a pretty significant tax burden in the UK, this "foreign trust" is likely to have a huge US tax burden - simply by nature of the trust not being based in the US. I am now looking into options for how to reduce the tax burden.
One option I was wondering about is as follows: I could request to be written out entirely as a beneficiary of the trust, and all of what was planned to go to me could instead be passed on to a relative (who is also a beneficiary of the same trust). Then, after all assets are passed onto the beneficiaries and the trust is dissolved, that relative could give the portions of assets intended for me as a gift. It seems that (provided nothing horrible and unlikely happens and the relative dies in 7 years) there would be no tax on the gift either in the UK or the US.
Are there any foreseeable problems with this potential option? Are there any alternative options which are better? Are there important details which I should find out about the trust before being able to identify which is the best option?
(Some potentially relevant details of the trust are that there are no US based trustees, there are multiple beneficiaries, most of whom are UK based, and that there are current discussions about exactly which beneficiaries will receive what from the trust. The trust is a discretionary trust. I have seen very little actual paperwork regarding the trust - I didn't really know it existed until quite recently. There are tax people working with the trustees in the UK, and I will certainly discuss options with someone here in the US too soon, but would like to get a feel for things and options before approaching a professional.)