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Question:

I am US citizen living in Illinois. I have a revocable living trust, the beneficiaries of which are my two nieces who are non-US citizens from Argentina. The assets that will be going to my nieces are currently in a brokerage account with Fidelity valued at $2 million. My successor trustees is an American citizen. From what I have been reading, it seems is very complicated for non-US citizens to be beneficiaries. What are the steps the successor trustee need to do for this after my death? Does the successor trustee need to consult with an attorney who specializes in non-US beneficiaries?

Response:

Our experience with Fidelity and non-U.S. resident owners has been very difficult. In fact, they seem much more concerned about whether the owner or trustee is residing out of the United States than whether or not they are citizens. But you are doing this right by using a revocable trust and have an American citizen serving as your successor trustee. I assume they also live in the United States.

But the question is what happens to your trust upon your death. It could simply end and distribute out to your nieces. Then your successor trustee could liquidate the investments and wire the cash to your nieces’ accounts in Argentina. Or the trust could continue for their benefit, in which case it will need to continue to have a U.S.-based trustee.

I also checked with Rita Ryan, who is an international tax specialist with the accounting firm of Wolf & Company, P.C.

Rita Ryan

Here’s what she had to add:

“The following response assumes the individuals are both non-U.S. citizens AND non-resident aliens for U.S. income tax purposes. The trustee should absolutely consult with an attorney concerning the distribution to the non-resident beneficiary, as well as any tax returns associated with the trust because there are identification forms which need to be completed by the non-resident (Form W-8BEN) as well as withholding forms for any distributions of U.S. source income to each beneficiary (Forms 1042-S etc.), and the corresponding payment of the withholding to the IRS. Although complicated, it is a process that is familiar to attorneys or accountants familiar with international tax reporting.”

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