What is an offshore trust asset protection?

What is a trust asset protection?

The trust is a legal institution of Anglo-Saxon origin, which found legal legitimacy in Italy following the accession of our country to the Hague Convention of 1 July 1985 on the law applicable to trusts and their recognition, which took place under the law 10/16/89 n. 364, in force since 1 January 1992.

Basically, it is a fiduciary legal relationship by virtue of which the owner of some goods strips themselves of them and gives them to a third person who becomes the owner, who will administer them in favor of one or more beneficiaries, or for a specific purpose, indicated by the initial subject.

More precisely: the DISPONENT (settlor in the English translation) is the one who institutes the trust and is the one who strips himself of the property of his property, or part of them, and transfers them, with a real real effect, owned by TRUSTEE who must administer them in favor of the BENEFICIARY / I (beneficiary) according to the contents of the trust act.

Therefore the subjects involved are essentially three the settlor, the trustee, and the beneficiary (s) (we will see that to these is added another possible figure: the guardian or protector of the trust).

The person who establishes the trust is the settlor: he who, a natural or legal person, irrevocably confers in the trust the assets that constitute the trust fund, dictates the rules of the trust, indicates its purpose and initially appoints one or more trustees; usually, the settlor also indicates the beneficiaries (or the rules for identifying them) as well as one or more protectors.

The trustee is the one who, as a natural or legal person, by virtue of the trust act, becomes the sole and legitimate owner of the assets, who receives them to carry out the purpose indicated to him.

But let us clarify immediately a concept: the property commonly understood by our civil system is profoundly different from that understood by the common law systems and in the specific case of the trust.

Our system focuses on the absolute, inviolable, unbreakable right that the owner has over the asset: the real estate, can be leased, given in usufruct, on loan for use, under management and other, but the owner has it is always and is identified.

In trusts, the focus shifts to the asset (mobile, immovable, or otherwise) of the person who sells it to the person who manages it, of the person who benefits from the management.

The consequence is that the assets transferred to the trustee are not “his” in all respects; for example, if he has his own debts, his creditors cannot attack the assets belonging to the trust; if he dies, his heirs cannot make trust property their own; if he fails those assets they do not enter the bankruptcy estate; etc.

The Trust is, therefore, a tool that allows the protection of Assets.

With the establishment of the trust, the effect that jurists call “segregation” of the assets conferred is then realized.

Therefore, summarizing, the set of assets that make up the trust cannot be the object of any claim by:

  • creditors of the settlor, since the assets constituting the assets that have been conferred to the “trust”, are no longer the property of the settlor;
  • personal creditors of the “trustee”, since the same, even if owner, holds the assets conferred only by virtue of the previous constitution of the trust, not in a personal capacity, but in favor of the trust and disposes of it according to the modalities that the “settlor” has defined when the trust is established;
  • creditors of the beneficiaries or their heirs, who can make a sale only with the dissolution of the trust (whose term is defined in the deed of incorporation) and the consequent transfer of ownership.

The Beneficiaries are those who, according to the rules of the trust, have the right to receive the income of trust property during the validity of the trust or to receive the devolution of the trust’s assets (money or other assets) upon its termination.

Another subject (if any) of the trust is the GUARDIANO: the one who controls the activity of the trustee ensures that the trustee faithfully fulfills the will written and consecrated by the settlor, consents to the most relevant acts, receives the accounting of what the trustee has accomplished.