Can I Select a Trustee Who Isn’t a U.S. Citizen or Resident?

admin March 9, 2026

Risks of Naming a Non-U.S. Trustee

Deciding who will manage your trust after your death or incapacity is one of the most important estate planning decisions. If your family and friends live abroad, it’s natural that you’d prefer to nominate them as successor trustees. However, naming a trustee who is neither a U.S. citizen nor a U.S. resident can have serious tax, reporting, and practical consequences.

Why Trustee Residency Matters

A trustee is responsible for managing your trust according to its terms, following California law, and making distributions to beneficiaries. When the trustee is not a U.S. person (U.S. citizen or resident), two major issues arise:

  • U.S. Tax Classification: The trust will be treated as a foreign trust for U.S. tax purposes.
  • Practical Administration: Banks, brokerage firms, and courts may require a U.S. presence or Taxpayer Identification Number, making it difficult for a foreign trustee to manage U.S. assets.

How a Trust Becomes a Foreign Trust

The IRS classifies a trust as foreign if it fails either of these tests:

  • Court Test: A U.S. court must have primary supervision over the administration of the trust.
  • Control Test: One or more U.S. persons must control all substantial decisions of the trust; no non-U.S. person may have veto power or authority over those decisions.

Substantial decisions include:

  • Distributions of income or principal;
  • Appointment or removal of trustees;
  • Investment decisions;
  • Selection of beneficiaries;
  • Termination of the trust; and
  • Legal actions on behalf of the trust.

(Source: 26 CFR §301.7701-7)

Tax and Reporting Consequences

If a non-U.S. person becomes trustee after your death:

  • The trust will be treated as a foreign trust.
  • U.S.-situated assets will be subject to immediate U.S. tax, including a 30% withholding.
  • The trust must file Forms 3520 and 3520-A annually.
  • Distributions to U.S. beneficiaries are reported and may face additional tax and penalties.

Even if all beneficiaries and assets are outside the U.S., tax reporting is required in the U.S. if the trust holds any U.S. assets or if the trust maker (grantor) was a U.S. citizen or green card holder at death.

(Source: IRS – Foreign Trust Reporting Requirements, Form 3520, Form 3520-A)

Preferred Trustee Hierarchy

To preserve the domestic status of your trust and simplify administration, it is recommended that you choose, in order of priority:

  1. U.S. resident trustee (citizen or non-citizen) – keeps the trust domestic and U.S. reporting simple.
  2. U.S. citizen living abroad – trust remains domestic, but the trustee must comply with tax reporting requirements in both the U.S. and the trustee’s country of residence.
  3. Non-U.S. citizen, nonresident trustee – trust becomes foreign, triggering U.S. tax reporting, potential penalties, and cross-border complexity.

Practical Considerations

Even beyond taxes, a foreign trustee can face logistical hurdles:

  • Difficulty accessing U.S. bank and brokerage accounts;
  • Challenges signing legal documents or appearing in U.S. courts; and
  • Delays in distributing assets or managing investments.

Bottom Line:

Naming a non-U.S. person as successor trustee is not recommended. The safest approach is to ensure all substantial decisions are controlled by a U.S. person. This preserves domestic trust status, avoids immediate U.S. taxes on U.S. assets, and keeps reporting manageable.