Technical article

How Your Citizenship Changes the Answer: US, UK, Canada, Australia and Europe

We ran the four home countries at US$2 million, picking lasting, protection and tax.

By Neil Solomon · 4 min read

Imagine four friends with US$2 million each, at an example dinner. One is a US citizen, one is British, one is German and one is French. Each wants the same thing from a trust: it needs to last, resist claims and draw little tax. They ask whether the same place suits all four.

What stays the same

We ran the four home countries at US$2 million, picking lasting, protection and tax. The first three places did not change: Nevis, the Cook Islands and the Cayman Islands. A home country shifts scores by a few tenths of a point. It does not reshuffle the top.

What moves

The middle of the list moves, and for specific reasons.

Three things drive the changes.

A US citizen files extra forms for a trust abroad: Forms 3520 and 3520-A, the foreign bank account report and Form 8938. The Form 3520 penalty is the greater of US$10,000 or 35% of what was moved. A trust in a US state avoids the foreign-trust forms and usually files one return a year. So US states rise for a US citizen.

Inside the European Union, courts enforce each other's judgments. For a German or French citizen, a place in the EU scores lower on protection, because a home judgment can follow the money there. Cyprus is 11th for the British friend and 19th for the German and French friends. The home place scores low for its own citizens too, since their own courts can reach it.

Germany and France both list Panama as a non-cooperative place. Our table caps Panama's standing for them. Panama is 18th for them, the same as for the British friend, because the cap touches only the standing score.

How each home country sees a trust abroad

• United States: the funder is taxed as owner under the grantor rules. A foreign trust that is not a grantor trust faces a tax on funding and extra interest on income held back.
• United Kingdom: the funder is taxed on trust income and gains when they or a spouse can benefit. Failing to register a trust costs GBP 5,000 (approximately US$6,500). The penalty for failing to correct offshore tax is 100% to 200% of the tax. Since 6 April 2025, assets abroad in a trust are inside inheritance tax for long-term residents, meaning 10 of the last 20 years.
• Canada: a non-resident trust with a Canadian contributor or beneficiary can be taxed as a Canadian trust on its world income. The trust is treated as selling its assets every 21 years.
• Australia: a resident who funds a foreign trust can be taxed on its income as it builds up, with an interest charge on income held back.
• Germany: section 15 of the Foreign Tax Act attributes a foreign family trust's income to the German funder.

Who this touches

You, as the person who files. A partner or child living in another country adds a second set of rules.

The objection

You might say a ranking by citizenship overreaches, since lawyers look at each family. That is true. The home-country settings in our table are simple: a reporting score, a tax score, a home-court cap, an EU cap and a list. They are a first pass. The forms and penalties above come from tax authority pages and law-firm summaries.

A few doors

You could read your own country's foreign-trust forms before choosing a place. You could ask a lawyer in your home country how your courts would reach each place.

Where does your home country change your choice the most? Share it here, and someone may benefit from your story.

Figures are estimates for planning, based on public data. Date read: October 2026.