Trust, as it is known, is a legal institution of Anglo-Saxon origin.
It indicates the legal relationship arising from the conclusion of an act inter vivos or of a will, with which an individual (settlor) transfers to another individual (trustee) property or rights with the obligation to administer them in the interest of the settlor or any other individual (beneficiary) or in order to pursue a specified purpose, under the possible surveillance of a third party (protector), according to the rules prescribed by the settlor in the trust founding deed and to the law governing the same.
Generally, the trust founding deed provides for that, upon trust expiry, the trust fund is transferred to its beneficiary (who may also be the same settlor).
The title on property or rights being the subject matter of the trust belongs to the trustee, who is obliged to administer them in the interest of other individuals. The property or rights being the subject matter of the trust are assets separated from the personal legal relationships of the trustee and therefore they cannot be attacked by trustee’s personal creditors, and they are not part of the matrimonial property or estate of the trustee.
The conclusion of a trust includes its founding deed, with which the settlor prescribes the rules of the trust, and the deed of transfer of property or rights to the trustee (which, generally, contains also trustee’s acceptance). Typically, these two deeds are incorporated in a single document. In the case of the so-called self-declared trust, there will not be a deed of transfer because the settlor and the trustee coincide, even if such deed can be defined as dispositive in a broad sense.
The trustee has the title on property being the subject matter of the trust and is obliged to administer it in accordance with settlor’s instructions. However, it is possible that the trust founding deed limits the trustee’s activity. Should the latter, breaching his obligations, affect dispositive acts on trust property or mix it up with his personal property, the remedies set out in Article 11, second paragraph, letter d) of The Hague Convention may be exercised within the limits permitted by rules on conflict of jurisdiction.
Registration of the Deed of Transfer of Trust Property
The deed with which immovable property is transferred from the settlor to the trustee must be registered in the Land Registry. The notarial practice combines this registration (which is executed against the settlor and in favour of the trustee) with a second registration (against the trustee), in order for the property lien arising from the creation of the trust to be clear.
Trust and Fiduciary Contract
The trust is deeply different from the fiduciary contract. One of the most significant differences concerns the consequences of the breach of the obligation not to affect dispositive acts of property being the subject matter of the trust. The breach of the pactum fiduciae entails the trustee’s sole obligation to compensate for damages caused to the settlor whocannot recover the property from or on behalf of (?) third parties. Should the trustee, instead, breaching the obligations arising from the trust, mix up trust property with his personal property or sell it in favour of third parties, it is deemed possible to exercise remedies to recover the property.
There are as many possible uses of a trust. A trust relationship is halfway between an obligation and a “special property” (but it remains preferable the definition of “qualified title”) that can be used for several reasons. Trust corresponds to fiduciary contract. The trust purpose must always be in accordance with the relevant legal system.
Amongst the most common uses there are those justified by:
Property protection. Often the trust is founded to protect immovable property; for this reason it is quite common to define it as “asset guarantee”. One of the most appreciated characteristics of the trust is actually the segregation of the assets granted so that they will not be affected by all prejudicial events personally involving one or more individuals interested in the trust. For this very useful characteristic, the trust is more and more used to separate personal property from corporate property and to protect the first one or to safeguard all those individuals whose assets may be jeopardized by risky professional activities (doctors, lawyers, public officials, etc.) or, simply, by irresponsible personal conducts (gambling, use of drugs and alcohol, etc.).
Confidentiality: the provisions contained in the trust may be reserved, and this may be a sufficient reason for its creation. Confidentiality is mainly referred to as the so-called “opaque trust” (which in Italy is punishable by tax regulations), where the trust may represent an excellent instrument to control entities and companies. Generally, it is employed abroad in activities of fiscal engineering.
Children and disabled persons protection: will provisions allow children and disabled persons to enjoy a limited possession of property until their legal age or without being the full owners of it respectively.
Protection of the estate for succession purposes: often a trust is founded in order to protect an estate in family succession planning or by dissipation by individuals incapable of administering it, addicted to gambling or excessively spendthrift;
Charity: in many common law systems charity organizations must be incorporated as trusts;
Investment and pension schemes: pension investment schemes and common funds derived from Anglo-Saxon trust funds;
Tax benefits: a trust may offer tax benefits. If tax savings are the only reason to found a trust, they can be considered illegitimate and subject to sanctions. As any legal institution, the elusive or evasive use is contrary to laws and subject to sanctions.
