Numerous recent decisions address the citizenship of trusts in determining federal court diversity jurisdiction. These cases reflect not only the proliferation of real-estate investment trusts (REITs) but also the fact that trusts frequently are named as members of limited liability companies (LLCs). The citizenship of an LLC must be determined in reference to the citizenship of each of its members—meaning that the citizenship of a trust becomes relevant in any case brought by or against an LLC where federal court jurisdiction is founded upon the diversity of the parties and the LLC has a trust as a member.
In Navarro v. Lee, 446 U.S. 458 (1980), the Supreme Court ruled that the citizenship of the trustee determines the citizenship of the trust for purposes of federal court diversity jurisdiction. But the straightforward Navarro rule no longer applies in at least three circuits. These courts instead have applied the Supreme Court’s later decision in C.T. Carden v. Arkoma Associates, 494 U.S. 185 (1990), a case concerning the citizenship of a limited partnership, to hold that the citizenship of trust beneficiaries must be considered in determining the citizenship of a trust, in addition to (or in lieu of) the citizenship of the trustee.
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