Wealth planning quick course: the trust, Part 4
In the next four posts, we will discuss the foundation, the private foundation, the trust, and the trust foundation in a few thoughts, summarising the most important facts. We will look at all four institutions from the same perspective, which we will summarise in a table for our kind readers at the end. The topic of today’s post is trusts.
Property, movable property, securities, rights representing assets, and both expired and unexpired claims can be taken into trust.
An important advantage is that creditors can only claim against the settlor in respect of debts existing prior to the trust, not in the case of debts arising after the trust was established. Due to the contract, the trust assets are not the property of the trustee, so that debts which are linked to the trustee cannot be claimed from the trust assets.
In the case of the non-business trusts mentioned in the table, the advantage is that there is no capital and no personal requirement, the trustee and the settlor can be the same, but only one such contract can be held by the trustee, the contract must be reported and attached to the Hungarian National Bank.
A business trust is, where a trust company is appointed to manage the assets and only passes the assets on to successors, beneficiaries when the conditions set by the trust deed are met. The advantage of the business trust compared to the previous one is that the human resources and professionalism are at a much higher level and that the assets are essentially in the hands of professionals.
Assets transferred into a trust are not part of the inheritance. With regard to the legitimate portion, it is important to note that the value of “assets transferred into a trust not more than ten years before the death of the settlor must be added to the basis of the legitimate portion. However, the value of assets transferred in trust more than ten years before the settlor’s death shall no longer be added to the basis of the legitimate portion.” Nor is it part of the marital property, and finally the identity of the real owner is practically invisible.
By contract or by unilateral legal act (there are two types of the latter: one where the trustee and the settlor are the same person, the other where it is created by will). The Hungarian National Bank registers the trust and issues the notification certificate for the trust.
Supervision / Control
The National Bank of Hungary (MNB) is appointed to carry out the authorisation and registration procedures, but the trust is not supervised by it, but is subject to a legal compliance check.
Under a trust deed, the trustee is obliged to manage the assets on its own behalf for the benefit of the beneficiary, as well as the rights and claims transferred to it by the settlor, and to pay a fee to the trustee.
There may be business and non-business trusts.
Non-business trusts are subject to registration, while business trusts require an authorisation.
The founder is the settlor who transfers the assets to the trustee, who may be either a natural person or a legal person.
The trustee, which may be a natural or legal person. If the settlor appoints more than one trustee, the trustees act and decide jointly.
As the representative of the settlor, the Protector supervises the management of the assets and carries out the rights transferred to him by the contract. The Protector is entitled to represent the settlor at all times and in full in any amendment of the Trust Deed, without further authorisation.
Termination by the founder
Yes. The trust terminates if the trustee terminates the indeterminate trust deed, unless otherwise provided.
Assets transferred / minimum capital
None, but it should be possible to specify what was transfer into the trust.
Possibility to join
As a settlor, it is possible.
Under general rules.
Transfer of founder’s rights
Yes, to the Protector, but this is not a transfer, but as representative of the settlor, he supervises the asset management activity and carries out the rights transferred to him in the contract.
The management of the assets involves the exercise of the rights and the discharge of the obligations arising from the ownership, other rights and claims transferred to the trustee. The trustee may dispose of the assets included in the assets under management in accordance with the terms and within the limits of the contract.
A trust shall terminate if
- the assets under trust run out,
- the trustee terminates the trust after three months from the date of termination,
- the assets held in trust have been without a trustee for more than three months, at the time of termination of the trust,
- the settlor was the sole beneficiary at the time of his / her death,
- the settlor terminates the contract of indeterminate duration, unless otherwise provided in the contract.
Maximum 50 years.
Nomination of the beneficiary
The settlor shall specify the beneficiary and the conditions under which the right of beneficiary arises and ceases. The beneficiary may be specified by reference to the class of beneficiaries.
Long-term investment contract
A long-term investment contract may be entered into by a trustee who enters into the contract for the purpose of performing the obligations of the trust deed.