Yes, a US citizen can be the trustee of a family trust in India without being a beneficiary, and the trust's income then isn't taxed to her in the US. The catch sits in the deed: one loose clause, usually the default one, can quietly make her a beneficiary anyway.
Why your parents' assets aren't your income
The US taxes you on trust income only when its rules treat that income as yours. For a trust your parents fund, two routes could do that: being treated as the trust's owner, or receiving distributions as a beneficiary. Close both and you're a manager, nothing more.
The trust is foreign, whatever you control
A trust is a US trust only if a US court can supervise it and US persons control all its substantial decisions, under IRC 7701(a)(30)(E). A trust governed by Indian law and supervised by Indian courts fails the first test. So it's a foreign trust even if you, a US citizen, make every decision.
That label sounds alarming, but for a foreign trust that isn't owned by any US person and earns Indian income, it mostly means the US doesn't tax the trust itself. The questions that matter are about you.
The power that would make you the owner
Section 678 of the Internal Revenue Code treats a non-grantor as the owner of trust property if she alone can vest the corpus or its income in herself. A trustee who can write herself a cheque is, for US tax, the owner of whatever she could take.
So the deed has to shut that door completely. You're excluded as a beneficiary, you can't add yourself later, and every power to distribute runs only to the named family members.
While your parents are alive, US rules may treat them as the trust's owners, foreign persons though they are. That doesn't make you one either.
Structuring a family trust in India so you manage, not own
The legal side in India is simpler than the US side. Indian law cares about who benefits; it doesn't require the person in charge to be one of them.
What Indian law lets you do
The Indian Trusts Act, 1882 lets any person capable of holding property be a trustee (section 10), and nothing in it requires the trustee to benefit.
A trust of immovable property has to be declared by a registered instrument or by will (section 5). So a flat or ancestral house can go in through a registered deed now, or through your parents' wills later.
What the Act does require is a beneficiary indicated with reasonable certainty (section 6). Someone has to hold the benefit. It just can't be you.
A worked example
Priya is a US citizen in New Jersey. Her parents in Pune plan to leave a flat, fixed deposits and mutual funds to a trust by will, naming Priya sole trustee and her aunt and two cousins as beneficiaries. Priya, her husband and her children are excluded, and she takes no fee.
On those facts, the trust's rent and interest belong to the trust and its Indian beneficiaries, not to Priya. Her US paperwork shrinks to an FBAR for the Indian accounts she can operate.
Now change one line. If the deed says that when the last cousin dies the property passes to the trustee's family, Priya's children become people who could benefit. A foreign trust with US beneficiaries is a different and far more expensive thing to run.
The clause I check first
What I see in practice
This question came to me on a call from a US citizen in exactly this position. Her parents wanted their assets in a private family trust she would run, and her accountant in India was clear on the Indian side but unsure about the US side.
That gap is the whole risk. A deed drafted only with Indian law in view can hand a US trustee the very power, or the very fallback interest, that pulls the income back to her.
I'd go further than the minimum. I'd keep yourself, your spouse and your children out of every clause that can pay anyone, including the residuary clause, and name a relative in India or a charity as the final default.
That last step matters because of section 83 of the Indian Trusts Act. If the trust runs out of purpose with property left over, the trustee holds it for the author or the author's legal representative, and as your parents' heir that could be you.
The US filings a trustee still has
Not being an owner or a beneficiary removes most of the paperwork, not all of it. Any trustee fee you take is your own compensation income, taxable in the US. Beyond that, which forms you file depends on what the deed lets you do.
| FBAR | Form 3520 | Form 3520-A | |
|---|---|---|---|
| Trustee only, with no way to benefit | Yes, if accounts you can operate top $10,000 combined | No | No |
| You, your spouse or your children can benefit | Yes, same $10,000 test | Yes, filed by each US person who receives a distribution | Only if you're treated as an owner |
| You also put your own money in | Yes, same $10,000 test | Yes, for your transfer to the trust | Yes, if you're treated as an owner |
The FBAR is the one that surprises trustees. It covers accounts you have signature or other authority over, under the IRS FBAR rules, so trust bank and demat accounts you can operate count even though the money isn't yours. The usual FBAR filing rules then apply.
Form 3520-A is the annual return of a foreign trust with a US owner, so a trust with no US owner doesn't file one. If the deed did let you benefit or take property, you'd be in the position covered in Form 3520-A for an Indian family trust.
Your personal inheritance is separate. Anything your parents leave to you directly isn't taxed in the US when you receive it. Bequests from foreign persons over $100,000 in a year still go on Form 3520, as set out in reporting an inheritance from India.
How India taxes the trust
India taxes a private trust's income through the trustee, as a representative assessee. Where the beneficiaries' shares aren't fixed in the deed, that income is taxed at the maximum marginal rate. The rule sits in section 164 of the Income-tax Act, 1961 and, from tax year 2026-27, section 307 of the Income-tax Act, 2025.
There's a useful exception for this family plan. If the trust is declared by will and it's the only trust that person declared by will, the income is taxed as an association of persons would be, not at the top rate. That's a real reason to use your parents' wills rather than a lifetime deed.
Living in the US also makes you a person resident outside India under FEMA. Have an Indian lawyer confirm how that affects your role, especially operating the trust's bank accounts, before the wills are signed.
Who this applies to
This applies to US citizens and green card holders asked to act as trustee of a trust funded by parents or in-laws who aren't US persons. The answer changes in three situations:
- You put any of your own money into the trust. You're then a transferor, and possibly an owner, so Form 3520 and Form 3520-A come back into play.
- You, your spouse or your children can benefit. Distributions to a US person go on Form 3520, and accumulated income paid out later can face the throwback tax and interest charge (IRC 665 to 668).
- The family structure is an HUF rather than a trust. A Hindu Undivided Family raises its own US classification questions.
It doesn't apply to an NRI with no US citizenship or green card, since none of these US rules reach you.
What to do before the wills are signed
- Get the draft will clause or trust deed and read the beneficiary, powers and default clauses with a US preparer.
- Confirm you, your spouse and your children are excluded from every class, including the final default.
- Remove any power that lets you vest income or property in yourself, alone or by adding beneficiaries.
- Decide on a fee before you start, since any fee is taxable US income.
- Confirm the FEMA position with an Indian lawyer, then calendar an FBAR for every year you can operate the accounts.
Read the default clause before anyone signs
Ask for the draft will or deed now and find the clause saying where the property goes once the named relatives are gone. If it can reach you or your children, get it changed before it's executed. I'm glad to review the US side with your CA in India before it's final.
Frequently asked questions
Can a trust exist without beneficiaries?
No, a private trust in India can't. The Indian Trusts Act requires the beneficiary to be indicated with reasonable certainty, so a family trust needs named beneficiaries even when the trustee is deliberately left out.
Who gets the money in an Indian trust if no beneficiary is named?
The author of the trust or the author's legal representative gets it, under section 83 of the Indian Trusts Act, unless the deed directs otherwise. For a US-citizen child acting as trustee, that fallback can point back at her, so name an ultimate default beneficiary as part of the wider estate plan.
Can a non-resident be a beneficiary of an Indian trust?
Yes, a non-resident can be a beneficiary of an Indian trust, since anyone capable of holding property can be one under section 9 of the Indian Trusts Act. Sending distributions abroad then follows the FEMA repatriation rules, with NRO balances repatriable up to $1 million per financial year after tax.
Does a US citizen pay tax on a fee for acting as trustee of an Indian trust?
Yes, a trustee fee is compensation for your services, so it's taxable on your US return like other pay. Unpaid trustees avoid that, which is one reason I'd settle the fee question before the trust starts.