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Non-Resident Trustee

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The owner of the company in a non-resident and has a E-1 visa.  Can he serve as trustee.  Doing  research it looks like he can but you have to have a second trustee that is a US citizen.  Is that correct.  

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I have always heard other ERISA attorneys take the position that a trustee has to be eligible to serve as a trustee under state law.  They seem to think ERISA does not preempt state law in that area.   I have never had the need to research the issue.  

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I have a plan that in Greenwich CT.  The company is based in Italy. The only owner/trustee is a non-resident alien with a visa.

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Apart from questions about whether a trust and trusteeship are created and valid under non-tax law, a plan’s sponsor might prefer that the trust be treated as a domestic trust for Federal tax law purposes.

 

“In order for a trust forming part of a pension, profit-sharing, or stock bonus plan to constitute a qualified trust under section 401(a), the following tests must be met:  (i) It must be created or organized in the United States, as defined in section 7701(a)(9), and it must be maintained at all times as a domestic trust in the United States[.]”

 

26 C.F.R. § 1.401-1(a)(3)(i).

https://www.ecfr.gov/cgi-bin/text-idx?SID=11fcc33aff5d36a6e50159549926b1f4&mc=true&node=se26.6.1_1401_61&rgn=div8

 

Unless the retirement plan’s trust meets a transition rule regarding the Small Business Job Protection Act of 1996, the plan’s sponsor might consider sufficiently involving one or more U.S. persons.

 

If the goal is establishing and maintaining the trust as a domestic trust, consider that merely adding a second trustee might not be enough if the first trustee is not a U.S. person and the second trustee lacks power to overrule the first trustee.

 

Some details are in the Treasury department’s rule:

https://www.ecfr.gov/cgi-bin/text-idx?SID=77049054e181a5d01c90facf3bef8340&mc=true&node=se26.20.301_17701_67&rgn=div8

 

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My reading says it's a two pronged test: 1. subject to US courts; and 2. controlled by a US Person.

US Person is defined in 7701(a)

              (30) United States person The term “United States person” means—
                     (A) a citizen or resident of the United States,

It would seem that an E-1 "Treaty Trader" would not qualify as a resident. 

So, the "control" of the trust must be by US persons, and E-1visa holder is not.

 

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