Today, I’m diving into a question I get a lot from the expat community.
Let’s say you’ve moved your life to Thailand. You’ve settled in, but your connections to the United States have started to fade. When it comes to your trust, you may realize you no longer have many relationships in the U.S. who could step in as trustee.
My name is Steven Li. I’m a California-licensed attorney focused on international estate planning, based in San Francisco. My family and I also spend a good portion of our time in Thailand, so I understand many of the important issues U.S. expats face.
Quick side note: this video is for general informational purposes only. It is not formal legal advice. For advice tailored to your specific situation, you should schedule a consultation with a qualified attorney.
So, is it legally permissible to appoint a non-U.S. resident as trustee of your U.S. trust?
The short answer is yes. However, while the law does not prohibit appointing a non-U.S. resident as trustee, there can be significant tax and administrative risks if the trust fails the IRS “control test,” which generally requires that one or more U.S. persons have authority over all substantial trust decisions.
Let’s walk through some of the issues that can arise when appointing a trusted friend or family member in Thailand or elsewhere overseas as trustee.
In some situations, the non-U.S. resident may genuinely be the only person available, and it may feel like all other options have been exhausted. However, in my experience, after discussing the situation with clients, we are often able to identify alternatives that are both practical and less risky.
First, let’s discuss some of the potential issues involved in appointing a non-U.S. resident trustee.
The primary concern is that appointing a non-U.S. person could inadvertently cause your domestic trust to be classified as a foreign trust in the eyes of the IRS. This can create major tax consequences. Foreign trusts may be subject to additional reporting obligations, withholding requirements, and potentially adverse tax treatment.
There may also be annual IRS filing requirements, and failing to comply can result in substantial monetary penalties based on the value of the trust assets.
There are also practical hurdles to consider.
A foreign trustee may encounter difficulties opening or maintaining U.S. bank or brokerage accounts due to strict banking compliance rules. In general, managing U.S. financial accounts, real estate, or other physical assets from abroad can be logistically difficult and expensive.
For example, the trustee may need to notarize or authenticate documents in the jurisdiction where the assets are located, which can create delays and additional costs.
Here are some suggestions when choosing successor trustees.
First, to minimize the tax risks discussed earlier, try to select a U.S. resident — ideally a U.S. citizen or green card holder.
If you absolutely must involve a foreign person, consider naming them as a co-trustee alongside a U.S. person. However, the trust document should clearly specify that the U.S. trustee has final authority over substantial decisions in order to better satisfy IRS requirements.
Second, make sure the person you choose has the financial literacy and organizational skills necessary to handle the responsibilities involved.
A trustee may need to communicate with the IRS, file tax returns, manage investment accounts, coordinate annual accountings, communicate with beneficiaries, and pay debts and expenses.
Third, you may want to consider hiring a professional fiduciary, such as a corporate trustee, bank, or private professional fiduciary.
This can be especially useful if your estate is complex or if you are concerned about family conflict. Professional trustees are generally objective, insured, and experienced in handling legal, tax, and administrative matters.
Of course, they also charge fees — often based on a percentage of the trust assets — and they may not have the same personal understanding of your family dynamics as a relative would.
When choosing a trustee, look for a peacemaker.
Sometimes the smartest person in the family is not the best trustee. A good trustee is often someone who is calm under pressure, transparent, fair, organized, and respected by the family.
Finally, always name backup trustees.
Life happens. Your first choice may move abroad, become ill, or simply decline to serve. Naming one or two backup successor trustees can help avoid the need for a court appointment later on.
Many clients also ask whether I, as their estate planning attorney, can serve as trustee.
In some situations, this can be a reasonable option — especially for clients who lack a suitable family member or who have a particularly complex estate that requires legal and tax expertise.
However, there are important ethical and financial considerations involved, and this arrangement should only be entered into with full disclosure and informed consent.
As private professionals, attorneys typically charge either hourly fees or trustee compensation based on the value of the estate. This is usually more expensive than having a trusted family member serve.
Additionally, attorneys may not fully understand the personal dynamics of the family in the same way a relative would.
In many states, including California, attorneys are generally prohibited from charging both legal fees and trustee fees for the same work. If you decide to name your attorney as trustee, keep these three points in mind.
First, be aware of potential “double dipping.”
An attorney serving as trustee may be acting in two separate roles: one as trustee managing assets, and another as legal counsel providing legal advice. Most states have strict ethical rules regarding double compensation, so make sure you clearly understand the fee structure.
Second, ensure there is a backup plan.
An individual attorney may retire, become incapacitated, or pass away before you do. Your trust can specify successor trustees, such as the attorney’s law partners, a trust company, a bank, or another trusted individual.
Third, formalize the appointment properly.
Ethics rules generally require attorneys to provide written disclosures and obtain informed consent before agreeing to serve as trustee. The attorney should explain that you have the right to choose someone else and that the appointment was made voluntarily.
One helpful drafting tip is to include a clear removal clause in the trust agreement. This allows beneficiaries to replace the attorney-trustee if performance becomes unsatisfactory or if fees become unreasonable.
Finally, you may want to consider a hybrid structure by naming both a family member and your attorney as co-trustees.
In this arrangement, the family member — including a non-U.S. resident family member — can help with the personal and family aspects, while the attorney handles tax matters, legal filings, and administrative complexities.
Given the significant risks involved in naming a non-U.S. resident trustee, I generally encourage clients to carefully consider the alternatives discussed in this video.
Of course, every situation is unique, and in some cases, appointing a non-U.S. resident may still be the best or only viable option.
For advice tailored to your circumstances, consult an attorney experienced in international estate planning so you can properly navigate these issues and protect your estate.
If you are facing a similar situation, I’d be happy to discuss your options with you. Feel free to reach out for an estate planning consultation. My contact information is included in the description below.
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