For California residents creating a revocable living trust, one question that often arises is whether a trustee—especially a successor trustee—can live outside the United States. In theory, the answer is yes. But in practice, it’s more complicated.
Let’s break down the legal landscape and practical realities of choosing a trustee who lives abroad, especially when the trust becomes irrevocable after death.
California Law: Can a Trustee Reside Outside the U.S.?
There is no express prohibition in California law against appointing a non-resident as a trustee. The California Probate Code is silent on any residency requirement for private individuals serving as trustees, whether they live in another state or another country.
However, there are indirect consequences of having a foreign-based trustee, especially when the trust becomes irrevocable due to the settlor’s (or last surviving settlor’s) death. These consequences arise primarily from:
• Fiduciary responsibilities under California law
• Practical burdens related to trust administration
• Jurisdictional complications with courts, banks, and taxing authorities
Although not barred by law, appointing an overseas trustee may create enough friction and complexity to outweigh the theoretical flexibility.
What Happens When the Trust Becomes Irrevocable?
Most revocable living trusts are designed to avoid probate and provide a smooth transfer of assets after death. But this process isn’t automatic. When the surviving settlor dies, the trust becomes irrevocable. The successor trustee must then step in to administer the trust and ultimately distribute the assets to beneficiaries.
This trust administration phase typically includes:
• Notifying beneficiaries and heirs
• Lodging the will (if there’s a pour-over) with the probate court
• Obtaining a Tax ID (EIN) for the now-irrevocable trust
• Opening a trust administration account at a bank
• Gathering, valuing, and managing trust assets
• Selling real estate or business interests
• Filing final income tax returns for the decedent
• Filing trust income tax returns (IRS Form 1041)
• Keeping detailed records and preparing accountings
• Distributing trust assets according to the terms of the trust
While this sounds procedural—and it is—many steps require in-person involvement, notary services, court filings, and face-to-face dealings with banks, brokers, real estate agents, and tax professionals. A trustee living overseas may find this especially daunting.
The Practical Challenges of an Overseas Trustee
1. Logistics and Delays
Physical distance can slow down every part of the administration process. Documents may need to be notarized and apostilled abroad, then mailed internationally. Phone calls to California institutions during their business hours may require middle-of-the-night dialing from Europe or Asia.
2. Limited Access to U.S. Institutions
Some banks and brokerages refuse to open trust accounts or allow control to be transferred to foreign persons due to concerns about regulatory compliance or identity verification. The IRS may flag trusts administered by foreign trustees as foreign trusts—which come with entirely different reporting obligations, including Forms 3520 and 3520-A, and steep penalties for errors or omissions.
3. Communication Breakdowns
Even with Zoom and email, the nuances of communication and coordination can break down when a trustee lives abroad. Frustrated beneficiaries may feel ignored, leading to suspicion or resentment—especially if distributions are delayed or decisions are not explained clearly.
Fiduciary Duties: Elevated Risks from Afar
California trustees owe fiduciary duties of loyalty, prudence, impartiality, and care to all beneficiaries. These duties require more than just honesty—they demand attentiveness, diligence, and clear, documented decision-making.
Here’s where problems can arise:
• A trustee delays selling real estate and the property declines in value. A beneficiary claims the trustee breached the duty of prudence.
• The trustee fails to provide a timely accounting or doesn’t respond to a beneficiary’s questions. This could be perceived as a breach of the duty to inform and report.
• Distributions are made in lump sums or at odd times without coordination with tax advisers. Beneficiaries may accuse the trustee of carelessness.
In each case, the physical distance and lack of presence can compound the perception—and sometimes the reality—of poor administration. This may ultimately lead to litigation.
When Overseas Trustees Go Wrong: A Recipe for Disputes
While many successor trustees do their best, the combination of distance, delays, and confusion can easily lead to conflict. Disgruntled beneficiaries may:
• Demand a formal accounting
• File a petition in probate court to remove the trustee
• Accuse the trustee of mismanagement or self-dealing
• Seek surcharge (monetary damages) against the trustee
Litigation drains time, money, and emotional energy from all parties—and defeats the original purpose of using a trust to streamline the transfer of assets.
Best Practices: What You Should Consider
If you’re drafting your estate plan and considering naming a non-U.S. trustee, think through these alternatives:
1. Choose a U.S.-based Co-Trustee
Pair the foreign-based trustee with a trusted person or professional in California who can handle day-to-day administration.
2. Name a Professional or Corporate Trustee
Some trust companies specialize in administering California trusts efficiently. This ensures a smooth process but usually comes with minimum asset requirements and fees.
3. Empower Beneficiaries or Advisors to Remove/Replace
Include a trust provision allowing beneficiaries or a trust protector to replace a foreign-based trustee if administration becomes burdensome.
4. Offer a Resignation Path
Some settlors provide an easy exit clause for a trustee who becomes unable to serve, paired with a clear successor list.
Final Thoughts
California law allows your trustee to live abroad—but practical wisdom often says otherwise. Trust administration is a hands-on, document-intensive, time-sensitive process. A successor trustee who lives thousands of miles away may find themselves overwhelmed—and unintentionally at odds with your beneficiaries.
If you have loved ones abroad and want to include them in your estate plan, speak with an experienced estate planning attorney to craft a strategy that honors your wishes while safeguarding smooth execution. A trust should be a source of peace—not litigation.
