Is my Canadian family trust a grantor trust for US purposes?
It can be, and the deed answers that question rather than the money. Grantor trust status follows the powers and interests that were retained, meaning what the settlor can still direct, revoke or benefit from, so an ordinary Canadian family trust drafted without the US test in mind may turn out to be one. The consequence is that the trust's income is treated as the settlor's own for US purposes regardless of who actually received it, and the information returns due change accordingly. Read the instrument against the test before assuming the trust is a purely Canadian matter, and read it again after any variation, because a change made for Canadian reasons can move the answer.
Why would the US tax trust income I never received?
Because grantor trust status attributes the income to the person who retained the powers and interests, not to the person who got the money. If the settlor is a US person and the retained powers meet the test, the trust's income is the settlor's income there even where every dollar went to someone else, and even where the trust holds no US assets at all. Families find this counter-intuitive and often resist it for a year or two before the returns catch up with them. The point of practical importance is that the test is applied to the instrument, so the exposure can be established, and often designed around, before any money moves rather than discovered afterwards.
Does a US citizen beneficiary make a Canadian trust a US problem?
It can bring the trust into the US system, though by a different route from the settlor's. Grantor trust status turns on retained powers and interests, and a beneficiary's interest can matter to that test; separately, a US-person beneficiary has reporting of their own on distributions and on their interest. So a trust with one US-citizen child among several Canadian beneficiaries is not a Canadian trust with a minor complication, it is a trust that has to be tested. The better time to do that is at drafting, while the powers and interests are still choices. After execution the options narrow to variations, and a variation has its own consequences on both sides of the border.
Which retained powers make the settlor the owner of the trust?
The test looks at what the settlor kept rather than at what the trust does: powers to direct or to revoke, and interests retained in the trust's property or income. A precise answer depends on the wording of the particular instrument, which is why a general list is a poor substitute for reading the deed. What is worth knowing generally is that the powers which matter are often the ones drafted for comfort rather than for tax, such as a reserved ability to change trustees, to direct investments, or to benefit from the property in defined circumstances. Those clauses tend to be added late, by people solving a family concern, without anyone reapplying the US test.
Do we need to redo Canadian trust planning if the settlor is a US person?
Not necessarily redo, but certainly retest. Canadian trust planning carried out without applying the US test is the most common source of dual-status trust exposure, and that exposure is usually structural rather than accidental: the arrangement does what it was designed to do here and creates an attribution there as a by-product. The work is to establish the status as it stands, identify which retained powers and interests are producing it, and then decide whether the Canadian objective can be met another way. Sometimes it can; sometimes the answer is to accept the status and file properly for it. Either way, establish the current position before changing anything.
Who reports the trust's income, the trust or the settlor?
Grantor trust status changes the answer, which is exactly why it has to be settled before anything is filed. Where the test is met, the income is reported by the settlor as their own for US purposes, and the information returns due are the ones that follow from that status rather than the ones a trust would otherwise file. Where it is not met, the trust and its beneficiaries carry the reporting between them. The two outcomes need different filings from different people, so a family that guesses tends to produce returns that contradict each other across the border, and a contradiction on the record is harder to deal with than a late filing.
Is the sale of foreign property taxable where I live?
For a resident, yes — worldwide gains are taxable, and the gain is computed in your own currency, so the exchange rate at purchase and at sale changes the number even when the local-currency price did not move. The country where the property sits usually taxes it too, often with a withholding or clearance step before closing, and that tax becomes a credit. A principal residence relief may apply to a home abroad on the same terms as one at home. See principal residence and foreign property.
I work remotely from another country for a company back home — who taxes me?
Usually the country you are physically in, because employment income is generally sourced where the work is done, with your residence country taxing it as well if you are resident there and giving credit. Three things follow: your employer may acquire withholding and social security obligations where you sit, a treaty tie-breaker may be needed if both countries call you resident, and a short trip that becomes a long stay can cross a residence threshold nobody was watching. See remote workers and digital nomads.
