USA Law and Practice Contributed by: Diana Zeydel, Marc Selden, Benjamin Babcock and Brian Smith, Greenberg Traurig, LLP
6.3 Fiduciary Regulation Fiduciaries are expected to invest and manage trust assets with care, skill and caution, and balance both risk and return in accordance with the purpose of the governing documents. Fiduciaries are generally expected to diversify assets unless the fiduciary rea - sonably believes that a failure to do so is consistent with the purposes of the controlling instrument. Even if the obligation to diversify assets is exonerated in the governing instrument, a fiduciary may be obligat - ed to apply to court for a variance, if following that direction is detrimental to the overall performance of the assets. Fiduciaries have a duty to act impartially, which requires balancing the interests of current ben - eficiaries against those of future beneficiaries. 6.4 Fiduciary Investment In the US, the prudent investor rule is the standard by which fiduciary investment of assets is evaluated. The prudent investor rule differs from modern portfo - lio theory in that it is a legal standard rather than an investing theory. The prudent investor rule borrows some of the concepts of modern portfolio theory in that it encourages optimisation of risk and return, investment efficiency and diversification, and total portfolio construction and return. The more important concept is process. The prudent fiduciary would gath - er relevant information, consider the needs of benefi - ciaries, both current and future, contemplate diversifi - cation, monitor the portfolio, and document decisions, all while avoiding conflicts of interest and breaches of the duty of loyalty. Diversification is generally required; a prudent fiduciary may reasonably decide that, based upon the terms of the instrument and the best inter - ests of the beneficiaries, diversification is not advis - able. Generally, enabling language in the governing instrument would be required to exonerate the duty to diversify and the prudent investor rule. 7. Citizenship and Residency 7.1 Requirements for Domicile, Residency and Citizenship Domicile, residency and citizenship each carry distinct legal and tax implications under US law. To establish domicile in a US state, an individual must demon - strate an intention to reside there permanently with
no present intention of removing therefrom. Actions that indicate such an intention include acquiring a primary residence, registering to vote, obtaining a driver’s licence, and using an in-state address for tax and legal purposes. Severing ties with a prior domicile is important to avoid conflicting claims. Residency for US income tax purposes is determined by citizenship status or by meeting the substantial presence test. US citizens and lawful permanent residents (green card holders) are considered tax residents and are subject to US income tax on their worldwide income, regardless of where they live. Non- citizens may be treated as US tax residents if they are physically present in the US for sufficient days over a three-year period. Citizenship is governed exclusively by federal law. US citizens and green card holders are subject to US estate and gift tax on their worldwide assets. Non- citizens who are not domiciled in the US are gener - ally subject to US estate and gift tax only on their US-situs assets, though treaty provisions may alter this outcome. 7.2 Expeditious Citizenship Standard Federal Naturalisation Process The US does not offer a general fast-track mecha - nism for citizenship based solely on residence in a particular state. Individuals seeking US citizenship must typically follow the standard federal naturalisa - tion process, which includes lawful permanent resi - dency (usually for five years), demonstration of good moral character, passing English and civics exams, and taking an oath of allegiance. Expedited Naturalisation Outside this programme, expedited naturalisation is available in limited cases under existing federal law – for example, for individuals who have served honourably in the US military or for spouses of US citizens working abroad for qualifying organisations. These pathways require specific documentation and are evaluated on a case-by-case basis.
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