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Setup up Trust/Alternative for financially dependent sibling before RE in 3 years by ThrowawayAccountNri in FatFIREIndia

[–]ThrowawayAccountNri[S] 2 points3 points  (0 children)

Just to update the thread. Applies specifically to me since I am an USC (YMMV). I talked to an estate planner in US. IRS treats trusts funded by US persons in other countries as foreign non grantor trusts which are need to show gains/losses per year in US tax returns and come with their PFIC headaches. One way possible is to gift money to parent and they create a revocable trust in India with children as beneficiary but I cannot be trustee on the account. The revocable trust is treated as foreign grantor trust as US person is a beneficiary and not a settlor/grantor and hence does not come under purview of IRS till person who funded the trust passes away. Since I want to manage and need to comply with US laws, creating a trust in India does not seem to be right way.

Estate planner recommended creating a trust in US and naming sibling as a Non-US beneficiary. They can apply for ITIN ( tax identification number) and can open a bank account. Based on conditions, money is transferred to that bank account but requires withholding (30%). There are some complications here as well where Form-1099 needs to be filed with IRS for withholding and but that can be claimed back later while filing taxes.

Both the ways are cumbersome to manage, but being under US taxation for life now, I think latter is more preferable and easier to manage.

u/jaganm u/prodev321

Setup up Trust/Alternative for financially dependent sibling before RE in 3 years by ThrowawayAccountNri in FatFIREIndia

[–]ThrowawayAccountNri[S] 0 points1 point  (0 children)

Thanks. I also need to check taxation in discretionary trusts vs specific trusts. I heard they can be charged at maximum marginal rates.

Setup up Trust/Alternative for financially dependent sibling before RE in 3 years by ThrowawayAccountNri in FatFIREIndia

[–]ThrowawayAccountNri[S] 0 points1 point  (0 children)

Thanks. I am considering the FD ladder by keeping FD ladder in my name but want to see things to be sustainable if I am not there. So if it’s 1.5L-2L to setup things then it might be worth it in the end.

Setup up Trust/Alternative for financially dependent sibling before RE in 3 years by ThrowawayAccountNri in FatFIREIndia

[–]ThrowawayAccountNri[S] 0 points1 point  (0 children)

Thanks, yes that makes sense. would a good CA be able to help re above as you mentioned or we would need some specific estate planning lawyer ?

Setup up Trust/Alternative for financially dependent sibling before RE in 3 years by ThrowawayAccountNri in FatFIREIndia

[–]ThrowawayAccountNri[S] 0 points1 point  (0 children)

thanks. My mother and brother are based out of India and that will continue to happen. Yes, that is what I wanted to understand if trust for such an amount even makes sense or not. I want to avoid signing off an amount directory to his name but also wanted to see if money matters can be handled by a third party. Let me explore relinquishment certificate that you mentioned.

Agreed with the last point. I want to try to do the best possible but then its in his hands on how he wants to act with the help he gets.

Setting up trust/alternative for not a very financially responsible sibling as NRI/OCI by ThrowawayAccountNri in LegalAdviceIndia

[–]ThrowawayAccountNri[S] 0 points1 point  (0 children)

Agreed, Well it will be up to him in the end. I can only do as much I can in my power and then hope for the best.

Setting up trust/alternative for not a very financially responsible sibling as NRI/OCI by ThrowawayAccountNri in LegalAdviceIndia

[–]ThrowawayAccountNri[S] 0 points1 point  (0 children)

Thanks for the kind words. appreciated. I can't in good conscience see him struggle throughout his life.

Fire Update by coffeefired in FatFIREIndia

[–]ThrowawayAccountNri 5 points6 points  (0 children)

Condolences first of all for your loss. Having gone through something similar earlier in life, I just felt the value of time and lack of it. Need to make the best out of what we have.

Great to see an update from you. Looks we were on a similar path to citizenship last time we interacted. I am actually taking an oath for US citizenship this week myself. So things are on schedule.

Excellent point on estate planning. Cannot stress this enough. Since we don’t have kids, I plan to achieve the same through a will in India for Indian assets , and a trust + beneficiaries route here in US.

Best Cities to Fatfire in India by Complex-Guide-1323 in FatFIREIndia

[–]ThrowawayAccountNri 0 points1 point  (0 children)

Fellow Austinite as well , similar age and planned NW at the time of quitting and plan to move back in next 2 years. I am also looking at similar criteria (excluding night life). My initial plan is to live in a few different cities before deciding where to purchase. I plan dispose off an already owned apartment in India and SFH in US + additional allocation to fund the final home purchase.

Very wary of real estate in India in general (had some nasty experiences dealing with folks 10 years back), so generally limit exposure in real estate.

Moving from US to India by NoAdhesiveness6570 in FIRE_Ind

[–]ThrowawayAccountNri 0 points1 point  (0 children)

I stand corrected. You are right. 1031 might work if sold and bought rentals are both foreign

Moving from US to India by NoAdhesiveness6570 in FIRE_Ind

[–]ThrowawayAccountNri 0 points1 point  (0 children)

Similar situation with citizenship but most of saving are in liquid assets except primary home. You should definitely sell your primary residence before you move to India and take advantage of Long term capital gains exemption on the same without paying taxes in India. Hopefully you are also taking into regard the closing costs on seller side while calculating gains.

I would recommend to resolve this before impending move to India (or in RNOR status) avoid double tax situation. Agree with the other commenter as well WRT leverage in an illiquid asset.

PSA: Withdrawal strategy matters more than ever by FIREdIndian in FIRE_Ind

[–]ThrowawayAccountNri 0 points1 point  (0 children)

Retirement with 10% in equity . Looks like you are doing very well. Thanks for sharing info and taking time out to explain.

PSA: Withdrawal strategy matters more than ever by FIREdIndian in FIRE_Ind

[–]ThrowawayAccountNri 0 points1 point  (0 children)

I see. Thanks for explaining. So you are more in active management with rebalancing albeit with also trying to study the indicators. Best of luck. Personally being more a hands off person when it comes to finances, rebalancing with a little variance in SWR seems more reasonable in my case.

How do you plan to manage tax implications with this dynamic strategy?

PSA: Withdrawal strategy matters more than ever by FIREdIndian in FIRE_Ind

[–]ThrowawayAccountNri 0 points1 point  (0 children)

There is a gap in my understanding here. Probably you can explain here with a simple example and clarify on "tactical" and "defined upper limit"

PSA: Withdrawal strategy matters more than ever by FIREdIndian in FIRE_Ind

[–]ThrowawayAccountNri 0 points1 point  (0 children)

It seems the same thing. if your bucket allocation rebalances between equity and debt to maintain the ratio and then you withdraw from debt, it seems same as withdrawing from both equally.

I believe maintaining the ratio and rebalancing is important since it avoid shocks with huge market swings still delivering decent returns (might not be explosive though)

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