USA – TEXAS Law and Practice Contributed by: Perrin Clark, Ytterberg Deery Knull LLP
and manage trust assets as a prudent investor would, considering the purposes, terms, distribution require - ments, and other circumstances of the trust. In sat - isfying the standard of prudence, the trustee must exercise reasonable care, skill and caution. In light of this, a trustee has a duty to diversify trust investments unless they reasonably determine that, because of special circumstances, the purposes of a trust are bet - ter served without diversifying. For example, the duty to diversify may be avoided if a beneficiary has unu - sual opportunities or risks, the settlor demonstrates an intent that the trustee retain or purchase certain assets, the trust holds a restricted asset or one that is meaningful to the settlor or beneficiary, or nega - tive tax implications would arise due to diversification. Such assets may include active and/or closely held businesses. The trust instrument also may relieve the trustee of any duty to diversity. Regardless, a trustee’s investment and manage - ment decisions respecting individual assets must be evaluated not in isolation, but in the context of the trust portfolio as a whole and as a part of an overall investment strategy having risk and return objectives reasonably suited to the trust. The trustee is required to consider a wide set of circumstances in investing and managing trust assets, as they are relevant to the trust or its beneficiaries. This essentially encapsulates modern portfolio theory. Foundations have a number of special limitations with respect to investments, including rules prohibiting excess business holdings and jeopardising invest - ments. 7. Citizenship and Residency 7.1 Requirements for Domicile, Residency and Citizenship Requirements in the United States Domicile A person is a domiciliary of the United States if they live in the United States with no intent to leave (ie, they intend to stay in the United States indefinitely) and, if they are temporarily away from the United States, they intend to return to the United States. The test with respect to domicile is a facts and circumstances test,
involving an examination of numerous aspects of a person’s life. A person’s domicile is important because it is one of the two bases for imposition of US transfer taxes with respect to a person’s worldwide estate. See the discussion regarding US transfer taxes in 1.1 Tax Regimes . Residency A person is a resident of the United States if they have the requisite presence in the United States (ie, accord - ing to the “substantial presence test”) or if they are a long-term permanent resident (ie, a “green card” holder). US residency has implications for US income tax, as discussed in 1.1 Tax Regimes . Citizenship Generally, a person becomes a citizen by being born to a citizen parent, being born in the United States, or naturalised. However, the legality of birthright citizen - ship is currently being challenged in certain circum - stances and related lawsuits are pending before vari - ous federal courts. Citizenship is important because it is one of the two bases for imposition of US transfer taxes with respect to a person’s worldwide estate. See the discussion regarding US transfer taxes in 1.1 Tax Regimes . Domicile, Residency and Citizenship in Texas Domicile in Texas has little, if any, relevance under Texas law. Citizenship with respect to Texas has no meaning under Texas law. Residency in Texas has some relevance with respect to severing tax residency in a former taxing jurisdiction and qualifying for in- state tuition at certain Texas schools. However, there is no general test for residency (ie, there is no mini - mum number of days required), except with respect to in-state tuition, which generally requires a person to have lived in Texas for 12 consecutive months (or 36 months before graduating from high school). 7.2 Expeditious Citizenship There is currently no expeditious citizenship pro - gramme in the United States (eg, there is no citizen - ship-by-investment or similar programme). However, requests to expedite the adjudication of a naturalisa - tion application and related proceedings are consid - ered, and may be accepted on a case-by-case basis.
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