US Person Trust in a Foreign Jurisdiction: What Seat Choice Can and Cannot Do

A US person trust in a foreign jurisdiction is often discussed as if the choice of country settled the outcome. It does not. For a settlor who is a US citizen or resident, the decisive questions are usually who holds control over the assets and what the structure must report, and both follow the settlor rather than the seat. The jurisdiction still matters, but mainly for how smoothly it supports a structure that has already been designed around those two questions.

This page is general information, not tax or legal advice. US tax treatment of a trust is a specialist field, and the answer for any family depends on residence, citizenship, the nature of the assets and the identity of the beneficiaries. What follows explains how to frame the seat decision so that an individual analysis, carried out with qualified US counsel, starts from the right place.

Why the seat cannot carry the whole decision

A trust seat is the place where the trust is administered and whose courts and regulators have a say in its day-to-day life. It is not the place that decides how a US person is taxed. The settlor's own status travels with them, wherever the trustee sits.

That produces a pattern worth stating plainly. A foreign seat can add a layer of reporting rather than remove one. It can also make some features harder to use, because a trustee in a regulated centre will ask questions that a lightly supervised provider might not. For a US person, a seat is therefore best judged on how well it supports transparency, record keeping and an orderly relationship with the settlor's other advisers.

The general method for ranking jurisdictions is set out in how to choose a trust jurisdiction. This page adds the layer that applies when the settlor has a US connection.

The two tests that dominate: control and reporting

The control test

Practitioners usually ask whether the settlor, or someone acting for them, keeps enough power over the trust that it is treated as an extension of the settlor. Typical features that draw attention include:

• a right to revoke the trust or take assets back;
• a power to direct investments or distributions;
• a role as protector with broad powers;
• a letter of wishes that the trustee treats as binding in practice.

None of these is wrong in itself. Each, however, changes how the structure is characterized, and the characterization depends on US rules that the seat does not rewrite. The way a protector's powers are drawn also varies from seat to seat, which is covered in protector and reserved powers law by jurisdiction.

The reporting test

The second question is what the settlor, the trustee and the beneficiaries must disclose, to whom, and how often. For a US person, a foreign trust typically brings specific information duties that sit alongside the trustee's own obligations in the seat. Missing a filing is usually the costliest error in this area, and it is often avoidable. A trustee who understands the settlor's status can build the calendar and the data collection from the start; the practical rhythm is described in the annual compliance calendar by seat.

Control and reporting burden by seat

The chart below is a qualitative appreciation, not a measurement. It compares the type of seat, not any named country, and the real position of a given country depends on its current law and practice.

Two readings are worth drawing out. First, the heaviest items are the ones that arise from the settlor's status and from banks' own policies, not from the trust statute. Second, the room for settlor-held powers is the only criterion where seats really differ in a way that matters for the control test, and even there the differences are about legal drafting, not about escaping the test.

How the seat interacts with a US connection

The point of the table is that the left column is the seat's contribution, and it is real but bounded. The right column is where a US person's analysis begins. Registers and what they disclose are examined in trust registers and privacy.

What Swiss reference points show

Switzerland is a useful reference because its approach to trusts is documented in official circulars, and it shows how a civil-law system without its own trust statute deals with foreign trusts.

• The Swiss Tax Conference published circular 30 on the taxation of trusts on 22 August 2007, prepared with the Federal Tax Administration. The Federal Tax Administration's circular no. 20 of 27 March 2008 declares its provisions applicable to direct federal tax and withholding tax as well.
• A trust has no legal personality of its own under Swiss law and is not a foreign legal entity within the meaning of article 49 paragraph 3 of the federal direct tax act. The trustee is the fiduciary holder.
• For a revocable trust, the treatment is transparent: assets and income remain taxable with the settlor at the settlor's place of residence.
• For an irrevocable discretionary trust, where the settlor lives in Switzerland at creation, assets and returns remain attributed to the settlor, with the same consequences as a revocable trust. Where the settlor lives abroad at that moment, the assets are attributed neither to the settlor nor to the beneficiary.

These points describe the Swiss position only. They show a recurring theme: what matters is the degree of retained control and the settlor's residence at a given moment, which echoes the control test a US person faces under US rules. They are not a statement of how any particular structure would be treated for a US person. The Swiss angle in more depth is in Switzerland as a trust seat.

Exchange regimes a US person will meet

Two exchange systems matter when a foreign trust is involved, and they work differently.

The common reporting standard has been adopted by more than 100 states, including all the major financial centres, according to the Swiss State Secretariat for International Finance. Its list of partner states is kept current, with recent reciprocal additions such as Curaçao, Romania and Trinidad and Tobago. A seat that sits inside this network will report on accounts held by non-residents of that seat, within the rules of the standard.

FATCA is the bilateral US system. Switzerland currently operates under an agreement of 14 February 2013, with aggregated reporting and group requests, described by the Federal Tax Administration as "FATCA IGA 2". A model 1 agreement, providing for automatic and reciprocal exchange, was signed on 27 June 2024. Its entry into force is planned no earlier than 1 January 2029, and implementation is under way. Other seats have their own arrangements, so this is one of the first points to check when comparing jurisdictions, as set out in reporting regimes compared.

Alternatives to consider before settling on a seat

A trust is one vehicle among several. For a US person settlor, it is worth asking whether another tool serves the objective with less friction:

• a trust governed by US state law, with a foreign element only for custody or administration;
• a foundation or company, where the vehicle choice changes the analysis; see trust, foundation or company;
• a combination of vehicles across seats, considered in combining trusts and foundations;
• no trust at all, with succession handled through wills and contracts.

A comparison of how common-law and civil-law seats approach these choices appears in common-law versus civil-law seats.

Illustration

Example: a consultant who holds US citizenship and has lived in Zurich for some years wishes to set up a trust for adult children who live in different countries. The first draft makes the settlor the protector with a right to replace the trustee and to direct distributions. The trustee in the proposed seat explains that, before accepting the role, it needs a full account of the settlor's status and of every power retained. The family then separates two questions: what powers the settlor truly needs, and which seat suits a structure with fewer reserved powers. The outcome is not a tax result. It is a clearer brief that US counsel and the trustee can both work from. This person is fictional and the example is only an illustration.

Points to verify before choosing

• Confirm the settlor's status and that of each beneficiary with qualified counsel
• List every power retained by the settlor or a related person
• Ask the trustee how it handles settlor reporting and who prepares which filing
• Check the seat's participation in exchange regimes and register rules
• Ask the bank how it treats clients who are US persons
• Decide who will keep the records over the long term
• Review the plan again after any change of residence

Further questions to put to advisers are in questions to ask your counsel on seat. If the settlor expects to move, trust law when the settlor relocates shows what changes. Fees depend on the structure and are indicated after the confidential assessment.