A TRUST is a legal instrument of the Anglo-Saxon system of “Common Law” based on fiduciary ties; it arises as a result of the stipulation of a deed, drawn up and transcribed in the United Kingdom, with which a person defined as the “settlor” confers, through a Notarial deed, his assets or rights within a legal transaction named, precisely, TRUST, where such assets or rights are managed by another person defined as the “trustee” who has the obligation to administer them in the interest of a third party “beneficiary” for the pursuit of a specific purpose.
In the first case, the right of ownership is an absolute concept that is not affected by the use that the owner can make of the property owned. In whatever situation the property is found (for example being given on loan, being rented, granted in usufruct, constituted as a guarantee, etc.), it is always attributable to an owner.
The second case, on the other hand, is characterized by greater pragmatism and allows the concept of ownership to be realized in function of the use of the property owned. Therefore, a particular form of trilateral fiduciary ownership is provided by virtue of which the property, without being the property of anyone in the strict sense, can be transferred by a subject, who transfers it to a legal transaction that will be managed by a trustee who administers it for the benefit of a third party (beneficiary).
The deed establishing the TRUST is called “Deed of TRUST”; it is drawn up in writing and contains two legal transactions: the first, the transfer of ownership of the assets from the settlor to the TRUST; the second, the rules to follow in the management of these assets.
The “Letter of wishes” is the document that the settlor can insert into the TRUST to give instructions regarding individual management and administration acts that must be carried out by the trustee.
The TRUST falls into the category of instruments for the protection and safeguarding of assets.
Who establishes a TRUST and who are the subjects involved?
The Settlor
Through an authorised English lawyer registered with the SRA, the settlor is the person who gives orders to establish a TRUST, transferring certain of his assets into it, thus obtaining the separation of the part of his assets transferred to the TRUST from that which remains in his patrimonial sphere (segregated effect).
In essence, the settlor is the physical or legal person who separates himself from an asset and transfers them into the TRUST. The settlor transfers ownership of the assets transferred into the TRUST, creating a split in ownership rights, into formal ownership of the TRUST and substantial ownership of a beneficiary. The settlor also determines the duration of the TRUST, which cannot be perpetual.
The TRUST is irrevocable by the settlor unless otherwise established in the deed of establishment.
The settlor can segregate in a TRUST generally any type of asset. In fact, this institution can have as its object not only real estate, but also registered movable assets, unregistered movable assets, company shares, bank accounts, credits and financial instruments.
The Trustee
The trustee, on the other hand, is the person who manages the assets transferred to the TRUST, in relation to which he has powers of administration according to the instructions given by the settlor and according to the purposes of the TRUST defined in the founding deed and in favour of third-party beneficiaries. The trustee also has the obligation to account for the management of the assets to the settlor, the beneficiary and eventually the “protector” where applicable.
The Beneficiary
The beneficiary is the person who enjoys the fruits of the TRUST when the settlor passes away.
The Protector
The “protector“ is a figure that is often inserted in the TRUST to which the settlor can assign various functions, such as: exercising administrative powers in agreement
with the manager; expressing approval on decisions taken by the trustee; giving directives or instructions to the manager; supervising the administration activity of the TRUST. Often the guardian is inserted especially when the beneficiary is a minor.
To Summarize
(A), the settlor transfers an asset into a TRUST (B), the TRUST, which effectively becomes the owner and which is managed by (C), the trustee, who undertakes to manage the asset received in favour of (D), the beneficiary, according to the provisions that (A), the settlor imposed when he transferred the property into the TRUST.
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