Recalde Law Firm, P.A. is a Florida law firm with an office in Miami, Florida. We advise on United States law only. We do not practice Mexican law, and we do not give Mexican tax or succession advice. We do not practice the law of any other country. Formation of a non-U.S. entity, and the local law of that jurisdiction, are matters for local counsel. We handle the U.S. architecture: classification, the documents a U.S. custodian and a U.S. court will read, and coordination with the family's tax adviser.
The trustee is the person, or the company, who holds title and who decides. The choice is not a logo on the front of the deed. It decides whether a U.S. court can supervise the trust, whether U.S. persons control the substantial decisions, whether anyone can act if the trustee dies or refuses, and whether a bank will open the account. Families make this choice. We do not recommend a named trustee, a named bank, or a named administrator.
The practice page is Foreign Trusts. A company formed to serve as trustee is private trust companies. The Spanish note is cómo elegir el trustee de un foreign trust.
Three seats, not a ranking
An individual family member is understandable and often already trusted. That person can die, lose capacity, or be a U.S. person whose decisions satisfy the control test. The trust is domestic only if the court test is also met, and a non-U.S. person who holds any substantial decision, including a veto, can make a trust that was meant to be domestic into a foreign trust. An institutional trustee brings a compliance program and a succession that does not depend on one life, and it brings the institution's own policies on what it will sign. A private trust company puts a board between the family and the trusts, which is useful when the family wants that process and will actually run it, and useless when the board is one person with a different title.
A structure we often see for families from Mexico, Brazil, or Colombia is an individual trustee who is a relative living outside the United States, with no successor who can get on a plane and sign, and a U.S. custodian that will not accept that relative. Families from Argentina, Chile, or Panama describe the same seat. The home-country rules on who may be a fiduciary stay with counsel there. The U.S. reading is the control test and the account.
The control test is a list of decisions
Under section 7701(a)(30)(E), a trust is domestic only if a U.S. court can exercise primary supervision and one or more U.S. persons control all substantial decisions. Substantial decisions include, in the regulations, distributions, selection of beneficiaries, investment decisions, and removal and replacement of a trustee, among others. If U.S. persons hold those decisions — as trustee, as a protector whose consent is required, or as a board of a U.S. company — the trust may be domestic even though the deed says it is governed by the law of another place. That result may be what the family wants. It should be chosen, not discovered when a form asks whether the trust is foreign. See the court test and the control test and protectors and reserved powers.
Successors, incapacity, and the bank
Name a successor, and name what happens if the trustee cannot serve. A trust with one trustee and no mechanism is a trust that will need a court, somewhere, at the worst time. If the trustee is a company, the company's own succession of directors is the mechanism, and it has to be real. See Wyoming private trust companies for the state statute families ask about, without treating Wyoming as a recommendation.
Then ask the practical question. Will the custodian accept this trustee, this protector, and these instruction rights? An elegant deed that no bank will administer is not a plan. The account file is opening a U.S. account. We read the deed against that file. We do not fill the blank with a name we prefer.