The trust allows individuals and companies to resolve a wide range of assets, finance and management issues in a simple and effective way. For instance, a trust can solve problems relating to the protection of movable or immovable assets, to the pressure of taxation reducing their profitability, to creditors demands and to succession, which disperses and fragments the assets themselves as they pass from one generation to another.

Trust assets management can also be adapted to social, tax and economic development occurring in the course of the years, so as to face foreseeable and unforeseeable changes in family situations, which may occur through the generations.

In this brief notes we will try to explain the trust, particularly focusing on the civil law and tax benefits it lawfully allows you to gain.

The trust is commonly defined as the legal relationship which arises when a person (settlor) transfers the ownership of a number of assets or rights to another (trustee), who undertakes the obligation to manage them for a certain period of time according to the person’s instructions.
The setting up of a trust creates a legal relationship, where the trustee is obligated to administrate trust assets to the advantage of specific beneficiaries or in view of an established objective. At the end of this period assets are definitively transferred to one or more people chosen by the settlor.

After the transfer, the settlor loses legal ownership of trust assets, which are thus held by a third party (trustee). However, the settlor retains control over the assets, by arranging a preset management plan and by assigning earnings and material benefits arising from the assets to people he designates.

Transfers of property to the trustee may be made, at one or more times, by the settlor as well as by other people, even after the setting up of the trust. The trustee may hold assets of any kind: money, securities, real estate, works of art, cars, boats, credits.

The trustee acquires the ownership of the rights transferred by the settlor and, as provided by the Hague Convention of 1 July 1985, ratified in Italy with the law of 16 October 1989 n.364 and effective from 1 January 1992, he is entitled to register assets, or documents of title to them, in any public or private register, including property registers. The trust document may also bind him to do so, thus revealing to third parties possible limitations to the trustee’s disposal powers.

After the transfer, during the life of the trust and as long as assets are owned by the trustee, trust assets are “segregated“.
The term “segregation” refers to a form of ownership that does not allow general events involving the settlor, the trustee and the beneficiaries to affect segregated assets and the relationship between the trustee and the assets themselves.

Apart from the settlor and the trustee, a trust may also include a protector, who, in force of specific provisions in the trust document, holds powers over the trustee, which would otherwise be maintained by the settlor.

The protector may be assigned considerable authority, both in terms of advisory power and an actual right of veto on certain acts. For example, the protector may be asked for prior permission to alienate trust assets, to distribute profit to beneficiaries, to divide shares among beneficiaries at the end of the trust, to change the trust document or beneficiaries and so on.

Within Italian law, trusts may be widely applied for very different purposes (fiduciary management, inheritance of family assets and businesses, earmarking of assets for charitable purposes, assets protection, etc.), which could not be achieved using the traditional legal instruments offered by the Italian Civil Code.

Here below are some examples:

  • Trust for succession planning
  • Trust for personal asset protection
  • Trust for the protection of vulnerable and/or disabled people
  • Trust for pension planning
  • Trust for asset management within de facto families
  • Trust for generational succession planning of a business
  • Trust replacing marriage agreement
  • Trust in couple difficulties
  • Trust for employee protection
  • Trust for mortgage management
  • Trust for bankruptcy proceedings management
  • Trust for works of art management
  • Trust for the management of relationships within agencies of the public sector