There is money to be made by loaning to & from a foreign trust. However, certain provisions must be met so that a loan can be “Qualified”. Otherwise, a loan to a trust is automatically considered as money to or from the trust.
To “qualify” a loan, certain conditions need to be met throughout the life of the loan. A loan must be in writing, its term cannot exceed 5 years, the interest rate must fall between 100-130% of the Applicable Federal Rate, it must be reported annually to the IRS, & you must expect to keep up with the tax responsibility for 3 years after the loan is up.
Careful records must be kept in order to prove your loan stays “qualified” throughout its duration. Otherwise, the money you are simply giving to or taking from the trust are subject to regular tax rules. So, I hope you can trust the trust you’re dealing with!
