Opening a U.S. Brokerage Account for a Foreign Trust or Limited Partnership

Recalde Law Firm, P.A. is a Florida law firm with an office in Miami, Florida. We advise on United States law only. We do not practice Mexican law, and we do not give Mexican tax or succession advice. We do not practice the law of any other country. Formation of a non-U.S. entity, and the local law of that jurisdiction, are matters for local counsel. We handle the U.S. architecture: classification, the documents a U.S. custodian and a U.S. court will read, and coordination with the family's tax adviser.

A U.S. brokerage account is titled in one legal name. If that name is not the owner in the trust instrument or the partnership agreement, the account and the plan describe different people. Custodians ask a short list: the legal name, a taxpayer identification number, a withholding certificate, the beneficial owners, and the names of the people who may give instructions. This note is that list. It is not a recommendation of a broker or of a product.

The service page is opening U.S. accounts for a foreign trust or holding entity. The trust is Foreign Trusts. The entity under the account is holding structures for U.S. investments. The Spanish note is abrir una cuenta de brokerage en Estados Unidos.

The title is the owner

For a trust, the account is opened for the trustee of the named trust, not for the settlor and not for a beneficiary. For a limited partnership, the account is the partnership's, not the general partner's, unless the general partner is itself the owner of those assets. Families from Mexico, Panama, or Argentina often already have a personal account at the same firm. Families from Chile, Colombia, or Brazil do as well. Leaving the positions in that personal name, because the relationship is already there, undoes the trust or the partnership for U.S. purposes. The personal-name account is the settlor's property. It is what a probate court and an estate-tax return will see.

The EIN, and the form that matches the person being paid

The trust or the partnership needs an EIN for the account. An EIN is an administrative number. It is not an election to be a U.S. resident, and it does not replace an SSN or an ITIN for the responsible party. When that person has neither, the IRS online application is closed. See applying for an EIN without an SSN or ITIN.

The withholding certificate follows classification. A foreign grantor trust, a foreign simple trust, and a foreign partnership (including a Canada LP that is a partnership for U.S. purposes) generally give the custodian a Form W-8IMY, with a withholding statement and the grantor's, beneficiary's, or partner's Form W-8BEN or Form W-9, as the case may be. A foreign non-grantor (complex) trust that is the beneficial owner, and a foreign corporation, generally give a Form W-8BEN-E. A non-U.S. individual who is the beneficial owner gives a Form W-8BEN. A U.S. person, including a domestic trust, gives a Form W-9. The tax adviser confirms chapter 3 and chapter 4 status. We confirm that the forms name the same trust or entity as the deed, and, where the form is a W-8IMY, the same beneficial owner the classification requires.

A Form W-8BEN and a Form W-8BEN-E generally remain valid through the end of the third calendar year after the year of signature, and sooner if circumstances change. A Form W-8IMY generally remains valid until circumstances change, but the certificates attached to it, such as the grantor's Form W-8BEN, have their own expiry.

The refresh belongs on the annual reporting calendar.

Beneficial owners, and instructions the custodian will take

KYC looks through the title. The settlor, the trustee, a protector, and anyone with a present interest will be asked for identification. A file designed so that those names cannot be given will not be opened. That is not a defect in the bank. It is the point of the rule.

The account agreement then asks who may trade and who may move cash. Those authorities have to exist in the instrument. Protector powers are a frequent break. A veto that the deed treats as essential, and that the custodian will not build into its mandate, is a power the family cannot use. The reading of those powers for U.S. tax purposes is in protectors and reserved powers. We do not ask the custodian to administer a power its operations will not accept, and then pretend the deed still works.

Classification before the first transfer

The firm assigns responsibility for the classification. The tax adviser prepares the returns. An account opened for an entity whose Form 8832 position is unset, or for a trust nobody has read under section 7701, will be titled in a name the tax return cannot use. Do the reading first. Then open the account in that name.