Protection of Assets through Trusts

The characteristics of the trust and asset protection

The characteristics of real estate trusts

The term trust comes from the English language and literally means trust. In the juridical sphere the trust is an institution that allows the regulation of different patrimonial relationships. It is characterized by the presence of three subjects:

  • the one who gives life to the trust (settlor);
  • the administrator of the trust (trustee); 
  • the beneficiary of the trust (beneficiary).
  • Thus a subject establishes the trust (a fund in which the assets subject to the trust are accumulated) by entrusting it to a director, in the interest of the beneficiary or for the purpose of achieving a purpose. The characteristics of real estate trusts are defined by the trust deed. The trust is a type of contract of Anglo-Saxon origin. In our system he was inserted in 92 by a law that ratified the Hague Convention concerning the institution of the trust. In common law systems, it has existed for more than five centuries. Each trust is assigned a tax code or a VAT number in the presence of an entrepreneurial activity.

Conferring a real estate trust can be a useful tool to implement a succession in an orderly manner and in compliance with Italian tax law. It also protects real estate from any future actions and any creditors.

The settlor, which establishes the trust and which must not have previously incurred serious debts in the past, can grant the trustee the ownership or bare ownership of the property.

The strength of the real estate trust is that it prevents the beneficiary’s creditors, the settlor and the trustee from attacking the assets forming part of the trust. Let’s see why:

  • the debtor’s creditors cannot attack the trust’s assets because they no longer belong to its legal sphere;
  • the trustee, being able to dispose of the assets according to the directives indicated in the trust deed, is not the owner of the assets and therefore his creditors cannot claim against the assets of the trust;
  • even the beneficiary is safe, as he will become the owner of the assets only at the end.

A real estate trust can be granted in different ways:

  • The settlor confers ownership of the property to the trustee;
  • The settlor can confer the bare ownership to the trustee maintaining its usufruct; 
  • The settlor can finally transfer the bare ownership of the property to the trustee by retaining the right of residence

The main objective of real estate trusts is to protect the assets from any actions carried out by the creditors of the 3 subjects that make up the trust. 
In addition to the basics of asset protection function, the real estate trust can be a useful and practical tool in the field of inheritance successions, to protect minors or family assets or even to effectively structure a generational transfer of business.

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