Can My Non-Citizen and Non-U.S. Resident Children be Beneficiaries of My Trust and IRAs?
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Question:
I have four adult children. Two are U.S. citizens and the other two are non-U.S. citizens. All are living overseas. Can I put them in my trust and name them as beneficiaries on my standard and Roth IRAs?
Response:
Yes, they all can be beneficiaries of your trust and your IRAs. For the traditional IRA, when your non-citizen children take withdrawals, the financial institution is required to hold back 30% for income taxes.
It’s also fine for all your children to be beneficiaries of your trust.
However, you may not want any them to become successor trustees. Many financial institutions are very restrictive in this regard, Fidelity in particular. If there’s a non-U.S.-based trustee they won’t allow any investments made in the account, and it doesn’t matter whether there are other U.S.-based trustees or whether or not the nonresident trustee is or is not a U.S. citizen.
So, check with any financial institution where the trust has accounts about what their rules are on the residency of trustees. That said, it may not really matter if all the successor trustees need to do is liquidate and distribute the trust funds. Even Fidelity seems to permit non-U.S. resident trustees to take these steps.
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