The Trust Applications

The Trust Applications

The trust is a very old institution of Roman law, that is, it is approximately two thousand three hundred years old.

Although it existed in our Civil Code since its original drafting, it was never used for real estate projects and, obviously, it has not yet been disclosed to the general public.

It was the controversial law 24,441 that, from a different point of view and for other purposes, revamped the institution so that, starting in 1995, it would be talked about again.

What Is A Trust

Let us briefly recall that the trust is a legal figure by which a person, called “trustor or constituent” transmits to another, called the “trustee owner”, the property of a thing, so that he can manage it for the benefit of a third party, called ” beneficiary” and, once a term or a condition has been met, definitively transmits it to whom the law calls “trustee”, who can be the beneficiary himself, the settlor, or a fourth person.

Parties Appearing In A Trust

Contrary to most common contracts, where there are only two parties (buyer and seller, landlord and lessee, donor, and donee), four people appear in this figure, which are: 1) the settlor or settlor; 2) the trustee owner; 3) the beneficiary, and 4) the trustee.

1) The settlor or settlor is the person who, being the original owner, establishes the trust, transferring its property or domain that, if full in its respect, becomes a trusted domain when it is transferred.

2) The fiduciary owner is the person to whom the former transfers ownership of the thing, (suppose it is a property), but this transmission is not like the common transfer of property since the fiduciary owner is not an owner common, but in reality, he is an administrator of that property, from which he does not get any benefit, except for some fee that he receives for its administration. This administration is not carried out for his benefit, but for the benefit of the third person of the institute, that is the beneficiary.

3) The beneficiary, as its name indicates, does not hold ownership of the thing, but is the one who benefits from the income produced by its exploitation, deducting expenses. Since, while the trust lasts, he is the one who benefits from the administration, he has full powers to demand that it be correct and to control the trustee owner. This beneficiary could be a third party, or the constituent himself (who would give the property to be administered for his benefit).

4) The trustee is the person to whom, after a period of time or when a condition is fulfilled, ownership of the thing will be transferred again by the trustee owner. Of course: unlike the property right of the trustee, which is very restricted, the property right of the trustee is full, since it implies leaving the trust, to return to a classic property regime.

Another characteristic of this old-new figure is that it can only last for a while, which the law establishes as a maximum of 30 years, or the life of the beneficiary if he is incapacitated.

The trust creates, in relation to the fiduciary owner, a patrimony that is called “affectation patrimony”, separated from the own patrimonies of all the participants of the trust.

This means that the assets in the trust will not respond to anyone’s debts, and will be affected by the purpose for which it was established, responding only to the expenses and debts derived from the administration of said assets. This gives enormous security to all those involved in the figure, since, in principle, nothing will affect its development and the achievement of the goals sought when constituting it.

What Is The Trust For?

It is a very useful institution, applicable both in the financial area and in the sphere of Family Law and from the perspective of Inheritance Planning.

As a financial legal instrument, it is a tool that, in certain businesses, will give the parties a lot of security.

An example: A person owns a piece of land, and enters into a contract with a construction company so that it builds a building there, and gives him a certain number of apartments as payment for the lot.

For the safety of both, the owner of the lot transfers the fiduciary domain to a fiduciary owner, who, in exchange for compensation, controls the work, and once the construction condition has been fulfilled within the agreed terms, grants the co-ownership Regulations and transfers to the settlor (original owner) the agreed apartments, and to the construction company, or whoever it ultimately indicates, (for example, the buyers of the other units), the ownership of the rest of the building.

Meanwhile, neither the bankruptcy nor bankruptcy of the original owner, that of the construction company, nor that of the fiduciary owner, will affect the end sought since the debts of these people cannot be executed on the trust property. In this way, everyone is assured that the business will be carried out.

Furthermore, buyers, as future trustees (if so established in the contract) will also be protected from the economic vicissitudes of owners, builders, etc., thus facilitating their investment by reducing risk.

An Example Of A Trust In The Field Of Estate Planning

Juan, single and elderly, wants to leave his nephew Pedro as his heir. The 21-year-old wants to be a sculptor and knows nothing about business. His uncle fears that, if he receives the goods from a very young age, due to his inexperience and also lack of knowledge or interest, he may lose everything in the hands of unscrupulous people, or simply due to bad administration. But he knows that his lifelong friend, José, a Public Accountant, is a skilled person for business and administration, and completely honest. But, also due to José’s age, he fears that in case he dies, there will be no one to administer.

Therefore, Juan grants a will, establishing that, upon his death, the fiduciary property of the valuable property of which he is the owner, and whose income he lives, passes into the hands of his friend José on the condition that he manage it, until that his nephew Pedro is 30 years old, at which point he will transfer full ownership to him (let’s assume that Juan assumes that, at the age of 30, Pedro will be mature enough to manage the assets).

Juan also arranges for José to manage and, as he is his friend, collect a percentage of the net income obtained, and a bonus when the property is transferred to his nephew.

In the event that José dies before Pedro turns 30, Juan chooses a “substitute trustee” (in this case, a trusted notary public).

It also establishes that, if his nephew dies, the income from the administration will be delivered to the Children’s Hospital for ten years, at which time the domain will be transferred to the Cooperating Association of said hospital, to sell the property, and build a pavilion that will bear the name of John.

Conclusions

With these simple examples, we can see that the figure of the trust is multifaceted and highly applicable in various aspects of life and law, and that, because it is a totally new figure in many aspects, it will require its knowledge and disclosure among the public. as well as a strong transformation in the system of thought of lawyers, notaries, and especially judges, as far as its acceptance is concerned.

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