Trust Services in Italy: what a trust is, how does it work and why it’s an useful vehicle for sustainable wealth preservation and growth
The trust is an institution of the common law legal system that can regulate a multiplicity of legal and financial relations. The trust has entered the Italian legal system when Italy became a party of the International Convention of The Hague on 1st July 1985, in force in Italy from 1st January 1992. In this regard, the trust has been strengthened by large series of Court decisions on the importance of this legal instrument.
Trust can be seen as a mandate through which a manager is appointed, the “trustee”, to follow instructions on how to hold and manage the trust fund, which can be composed by different types of assets, like real estate, financial instruments, shares, credits, arts etc. The aim of a trust is written in the deed of trust and it’s directed to satisfy the needs of the “beneficiaries” (individuals, companies, charitable entities etc.). Who formally establishes a trust is known as the “settlor”.
The most important effect of a trust is the separation between the personal assets of the settlor and the trust fund, so that the trust fund is protected by debtors and insolvency of the Settlor and also by any charges belonging to the trustee.
If the main positive effect of the establishment of a trust is the complete protection of the assets under a trust, we can also add the flexibility of management in a medium and long term so that families and corporations can plan the generational transition. And also, planning the generational transition for the successors could also mean optimizing the fiscal effects.
Trusts can take effect during the lifetime of the settlor or after the death of the settlor, and that means that it is important to establish now the rules for the future.
The purposes of a settlor can be various, in particular: the management and the protection of family assets from the bad events of life and business; the management and the protection of assets for minors and people with disadvantages; the planning of inheritance; the management of a company or a group of companies, acting with a trust as a holding entity; protect the voting syndicates in the companies; the management of M&A transaction, instead of an escrow contract; the management of charitable assets, using the fiscal advantages that in Italy are reserved to these kind of projects.
The use is wide and more purposes can be imagined because the trust is the most flexible fiduciary system we can find in different jurisdictions.
What we do for our Clients that need a wealth planning consultancy is an analysis of the most efficient instruments to use for their needs. If we find the trust well-fitting, we start with a tailor-made project, constantly shared with the client, implemented and improved through the drafting of the specific clauses, with an important focus on previous Court decisions, to guarantee the client the safety of a highly effective tool.
Not only consultancy but also managing: we also act as the trustee, as responsible in charge for the management of assets; co-trustee, in the case of a collective body, together with other trustees; or as a Protector, to overview that the trustee is acting in respect of the law and the deed of trust.
What we offer is not a standard formula but a consultancy that comes from the fact that everyone of us has been working on managing assets (money, real estate, arts, shares) for several years.
We are independent from bank and other financial institutions in order to avoid any conflicts, that is one of the cornerstones of the trust in our Italian fiscal-juridical system.