Can I Have a U.S Trust Even Though I Live Out of the Country?
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Question:
I’m a US citizen living abroad, my wife is a non-US citizen. I have two children living in United States and they are both US citizens. My property and all my assets are in U.S. I don’t own anything overseas. Can I draft a revocable trust in the state where my child who I would designate as trustee lives?
Response:
Yes, that should be no problem. The trust laws are not affected by where you live. The tax laws are not implicated in this case either. You should use your Social Security number for the trust.
Where things get a bit complicated is when and if you pass assets to your wife, who’s a non-U.S. citizen. Technically, if you give her more than $164,000 (in 2022) during a calendar year, you are supposed to file a gift tax return. However, there’s no tax until you’ve given away $12.06 million (in 2022) cumulatively in taxable gifts.
This is also true post-death. While there’s never any estate tax on what you leave a U.S.-citizen spouse, anything in excess of $12.06 million left to a non-citizen spouse will be subject to estate tax. At those levels, this doesn’t affect too many people, but it will be reduced in half beginning in 2026.
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Hi Harry. This is great info. I am a U.S. citizen who received Italian citizenship about five years ago. My husband is Italian. I want to consider setting up a simple trust to make his life easier should I pass away before him. I am an Italian resident (also with my tax filings). I no longer own property in the United States but all of my assets sit in the U.S. My husband doesn’t have a ss number because he has never lived there. Does a trust make sense for me? I don’t want to spend a lot of money creating one and don’t need it managed (simple assets). Thanks.
Alesia,
Yes, I think a trust makes a lot of sense. But a lot depends on the investment company where your assets are housed. I know that Fidelity Investments, for instance, is very difficult to deal with when the trustee is not a U.S. resident even if they are a U.S. citizen. So it may be necessary to have a U.S.-resident trustee even during your life and especially upon your death in case you were to die before your husband.
Harry
How about Charles Schwab in terms of dealing with when the trustee is not a U.S. resident?
Ikwahanoh,
I don’t have any experience with Charles Schwab in terms of non-U.S. resident trustees. If anyone does have experience with Charles Schwab or other investment firms, I would be very interested in hearing about it.
Harry
My wife and I live in Thailand. I am a U.S. Citizen and my wife is a Thai citizen and a non-resident alien. Can I set up a Trust to transfer her Arizona State Retirement System survivor monthly pension into and then have it transferred by the trust to her bank account in Thailand? Do I have to be present in the U.S.A. to set up the trust?
Steve,
That sounds possible, but you’ll need to check directly with the Arizona State Retirement System. Also, you’ll need a U.S.-based trustee to manage the trust.
Harry
I am a natural born US citizen and 70 y/o disabled veteran living in Peru. Currently my assets are only about 350K. I have three kids in the states, in CA, TX and PA. Where would it be most advantageous to create a living trust? I don’t expect you to tell me about Peruvian law. However, can you tell me if the trust can take title to foreign real property, assuming that is allowed by the foreign country?
Bill,
I can’t tell you about any of the states you ask about (I just practice in Massachusetts), but revocable trusts (which are the same thing as “living” trusts) are almost identical in all states. There should be no bar from the point of view of U.S. law in terms of titling your property in such a trust. But I’d be surprised if Peru law would recognize a U.S. trust. As you say, a local abogado can advise you on that question.
Harry
Hi Harry, my nephew is a US citizen who is only 5 years old and lives overseas. His parents who are non US citizen want to buy a house in the US for him. Should they set up a trust for him in the US or what would be the best way? I am a US citizen who can help but i dont want any tax impact for me.
Juju,
Yes, that probably does make the most sense. As a U.S. resident, you could serve as trustee. The trustee could be for the benefit of your nephew. It would probably make sense for his parents to be grantors and to make the trust revocable so that they could make changes in the future if those chose to do so, for instance if they had other children and wanted to include them.
In any case, you should all consult with a U.S.-based estate planning attorney to discuss the goals and various options to achieve them. This could be done by Zoom.
Harry
Hi Harry, thank you ahead of time for your kind insight! I’m currently traveling overseas but I’d like to set up an irrevocable trust, Do I have to be in USA to set it up? Or can I do it while I’m away?
Amy,
You can sign the trust while you are overseas. The real question is notarization. For the most part trusts do not have to be notarized unless they are going to hold title to real estate, but this requirement can differ from state to state. So, if the trust must be notarized either due to state law or your plan for it to hold real estate, you will need to go to a U.S. embassy or consulate to have your signature notarized. Otherwise, there’s no such requirement.
Harry
Hello, I’m a U.S. citizen moving to the Philippines while continuing as a non-professional trustee for my family’s testamentary trust. I manage royalties and monthly payments to my siblings, and file the trust’s taxes online. Are there any tax or legal implications to consider? Thank you.”
Matthew,
There should be no legal or tax issues. There could be practical ones, at least if any of the accounts are at Fidelity. They bar any trades in investment accounts if any of the trustees are not U.S. residents, though they do allow existing investments to be sold and payments to be made. This has been a problem for a number of our clients. I don’t know whether this is the case with other banks or investment companies, but it’s worth asking.
Harry
My husband and I are both U.S Citizens but living in China. Can we setup a RLT in MA for our MA property and be the sole Trustees?
PK,
Yes, you can create a revocable trust in the United States and serve as the sole trustees even if you’re living overseas. There should be no problem with this if the trust only holds real estate. Where this can get problematic is with investment accounts. Some investment firms, including Fidelity, require all the trustees to be U.S. residents.
Harry
As a US citizen living overseas, I have had the same problem with my US broker who will no longer accept any US non resident clients and will only allow existing clients with a non US address to sell shares or to liquidate the account. I finally found Interactive Brokers – a global online brokerage firm that will accept clients from anywhere and who appear to be highly reputable.
Thank you, Kathy. That should help a lot of people. Here’s their website: https://www.interactivebrokers.com/en/home.php
Harry
I am a US citizen with no children or spouse and have lived outside of the US for many years. The only assets I have in the US are a bank account and a broker account. Can I set up a US revocable trust, as the grantor and trustee, in a state of my choosing if I am not a resident of any state in the US? If so, can this be done with no need for a US Will and probate and with no existing ‘nexus’ in the state where the revocable trust is set up?
Kathy,
Yes, you can do all that. The only problem is that some brokerage companies require the trustees to be U.S. residents. For instance, this is a requirement of Fidelity Investments. Such requirements have nothing to do with state law but can raise practical impediments to what you hope to accomplish. So check with your bank and investment firm before you go ahead.
Harry