Can a non-resident be a beneficiary of a trust?

Yes, the beneficiary can be a non-resident. Many jurisdictions under trust law provide flexibility in beneficiaries, and thus, persons who do not reside in the country where the trust was set up can also be named as beneficiaries. This feature is an advantage in international estate planning whereby one or more family members may have residences in several countries.

Normally, the management of the trust and terms contained therein are the responsibility of the trustee, and he is usually permitted, at his discretion, to distribute income and principal to beneficiaries regardless of their residency status. However, when a non-resident is named as a beneficiary, there are several important considerations against this.

First would be the legal framework of the trust, which in large part will determine how distributions to non-residents are treated. Some jurisdictions impose tax obligations on the distributions made to non-resident beneficiaries. For example, in countries such as the United States, non-resident beneficiaries may have withholding tax applied on income derived from a trust, particularly if the trust is generating U.S.-sourced income. Similarly, some countries have estate or inheritance tax consequences for non-residents receiving distributions from a trust.

Secondly, there is the choosing of a trustee. If the beneficiaries are non-residents, for instance, the duty may well be imposed on the trustee to ensure that the beneficiaries comply with international tax filing requirements. Further, countries have complex tax treaties which almost always must be considered to avoid double taxation.

The last very important thing is the involvement of legal and financial experts in the trust who will represent those concerned in the establishment of the trust about implications concerning having beneficiaries who are non-residents. The agreement of the trust can be done in a way that covers certain aspects related to the treatment of foreign beneficiaries and the applicable tax obligations to make the administration go smoothly while following international laws.

In other words, though non-residents can be beneficiaries under a trust, much consideration shall be given both to the nature of the trust and to international taxation.