Swiss Advisors 1973
The different types of existing Trusts can be classified in 4 categories:
1 - Revocable trust, in which the settlor reserves the right to revoke the trust after it is set up, obtaining the return of the contributed assets
2 - Irrevocable trust, in which the settlor is permanently deprived of the assets placed in a trust for the benefit of beneficiaries or for an identified purpose.
3 - "Fixed interest" trust, a particular type of trust in which the share of income or capital to which each beneficiary is entitled is established in advance.
4 - Discretionary trust, in which the Trustee is responsible for managing the assets in the interests of one or more beneficiaries not previously identified, but on the basis of criteria identified by the settlor for which the Trustee can choose when and how much to distribute.
The main characteristic of the trust's legal institution is flexibility as it adapts to numerous uses. We will take a look at the details of the primary ones.
Family trust
One of the most frequent uses of the trust instrument is surely within the family, with the goal being to protect the needs of the family, even non-traditional and expanded ones. One of the classic cases is a grandfather who wishes to leave his assets to his grandchildren. The trust is also a valid instrument for regulating the economic relationships between spouses and life partners, while together or at the time of separation. During everyday moments and in times of crisis, family life always involves the natural need to protect its most fragile members (children, the elderly, those with an illness, or those who are not self-sufficient). The family trust is the ideal instrument to achieve this purpose.
The trust for asset protection
Another common use of this instrument relates to financial asset issues. The primary effect of establishing a trust is asset segregation, for which the rights and assets conferred are separate from the Trustee's assets. Consequently, those assets in the trust cannot be levied against by the creditors of the Trustee, the Settlor, or the Beneficiary. It is a sort of asset armor. Financial assets will be unaffected by any detrimental event that personally involves one or more of the parties in the trust. For this reason, this extremely useful characteristic of the trust is increasingly used to separate and protect personal assets from corporate ones or to protect all those whose assets may be compromised by risky professional activities (entrepreneurs, CEOs, doctors, lawyers, etc.) or, simply, by reckless personal behavior (gambling, drug and alcohol use, etc.).
The trust for generational transfers
The "generational transfer" is one of the issues that may lead the entrepreneur to use a trust. Handing down a business is not always simple and feasible since often the children are not on the same level as the entrepreneur parent or are not able to manage the company in the same manner with the same results. The primary goal of a company transfer is business continuity, to preserve its value, maintain its course with a mid to long-term strategy, obtain results in line with expectations, and contain the tax burden. The trust is able to pursue all of these goals.
Trust Holding for the company
Trust holding is a tool for holding and managing shares through which the entrepreneur lays the foundations for the company's business continuity and structured management, even when they are absent, as a guarantee not only to the beneficiaries of the trust, but also to employees and third parties that interact with the company. Through the contribution of the shareholding in the trust, the entrepreneur does not lose control of the company but rather remains necessarily operative. With the typical flexibility of the instrument, the trust act governs the entrepreneur's position and the trustee's responsibilities, which are necessarily different depending upon the entrepreneur's absence or presence.
Therefore, the trust holding is an excellent instrument to enhance the value of the company's assets and to lay the foundations for the orderly and straightforward management of the generational transfer. It gives a business project continuity over time and guarantees the company's future. With the help of professionals or other subjects designated in advance, it gives continuity to the company's strategy and management.
The business crisis trust
The business crisis trust or liquidation trust has proved to be, among other applications, a very useful instrument for managing company crises, with benefits for creditors and debtors, always based on the principle of asset segregation.
Special purpose trust
The special purpose trust does not have a fixed beneficiary because it serves a specific purpose that does not require the identification of beneficiaries but is established for achieving a certain purpose. The types of assets that may be placed in the trust are the same as for all of the other kinds. The assets comprising the trust will remain separate from the personal assets of the Settlor, Trustee, and Beneficiaries and will be used to achieve the established purpose.
For example, the special purpose trust may be used to protect the interests of associations and entities or to pursue a charitable purpose such as the creation of scholastic institutions, hospitals, care centers, or funding for churches or places of worship. Another example is the donation of land to build a Church that occurred in the past, with uncertainty for the future that, if the church is closed, the land could be used for other purposes. Through a special purpose trust, the owner could decided that, in the future, the land must only be used for free or religious purposes or for the sole purpose of prayer. In this manner, the purpose is guaranteed.
Vulnerable beneficiary trust
Vulnerable beneficiary trusts are established to assist certain members of the family, such as minors, who are not yet legally or materially capable of managing their own interests, or individuals with a known incapacity, as they are disqualified or disabled, or other individuals who require special protection due to weak character.
The vulnerable beneficiary trust is able to meet the needs for asset protection as well as those for the purpose of caring for, maintaining, and supporting disabled individuals. In fact, the use of this instrument not only allows the segregation of specific resources for the purpose of assistance and caring for the vulnerable individual, but also guarantees the person an entire series of non-legal benefits that are usually inherent to the family (such as living in a certain house, benefiting from particular therapies, or taking part in activities that are of comfort to the disabled person).
Plus, using these tools, the vulnerable individual's family members can verify, while they are alive and fully capable, whether the chosen solution is effective in achieving the desired purpose, and they can modify it if the choice is not suitable.
Real estate trust
The real estate trust is a type of trust in which only immovable property is transferred. It is used to concentrate and manage the succession in an orderly manner, maintaining the unity of the family estate over time. The trust can take full ownership or bare ownership of the property, allowing the settlor to use it.
Art trust
The art trust is a legal instrument suitable for protecting and enhancing artistic assets. When establishing a trust for the protection of artistic assets, the Settlor not only entrusts the management of the works of art in the trust to expert professionals, they also ensure that the unity of the collection is maintained, even after the owner's death. The trust's segregation effect allows the assets to be placed in a separate pool from those of the Settlor and the Trustee. For this reason, it is often used by those who wish to see their art collection, no matter how large or small, remain together, perhaps in the hands of a single individual, without worrying that it could one day be broken up.
Philanthropic trust
One of the other applications of the trust is related to charity or philanthropic purposes. This type is substantially a special purpose trust to pursue a solidarity or philanthropic goal to which the family or entrepreneur is attached, whether they wish to allocate part of their assets to an already existing entity or to create a new institution. This type of trust allows a philanthropic project to be implemented or managed with medium to long-term goals, with the certainty that the assets or part of them are intended for a certain purpose and they will not be misappropriated in the future.
Trust for de facto couples
The trust for de facto couples is a valid solution for new, modern families. Asset protection instruments have changed and evolved little by little to adapt to changing social situations and to the evolution of family legislation. Many countries lack legislation to protect de facto couples or for those individuals who live together without any marital ties. In this case, the trust instrument can cover the legislative gaps in certain countries, offering solutions to protect interpersonal relationships benefiting from unrecognized rights or assets for de facto couples such as individuals who live together without being married or to protect unrecognized children.
Through the trust, the couple (even if made up of two people of the same sex) may create a flexible structure aimed at mutual protection of the two cohabiting individuals, creating an instrument similar to that of legal communion, but with the freedom to independently establish the rules for managing the assets conferred in the trust and manage any adopted children.
Trust for marital separation
The trust proves to be an effective tool in the context of divorce and marital separation. In this context, it is often necessary to deal with the problem of separating assets held jointly, often resorting to registering the property in the children's names. Sometimes, however, there are additional problems (such as when the children are still minors or unable to manage the assets), which can be easily solved by setting up a trust.
In fact, with this instrument, the assets in the trust will remain separate from the personal assets of the two spouses for the exclusive benefit of the children who, even if still minors, will be indicated as the beneficiaries of the trust and the assets placed in the trust will be managed professionally to their advantage. However, setting up the trust must be dependent upon the presence of interests worthy of protection and for this purpose and must not be used to conceal assets in order to avoid immediate and legitimate revocatory actions intended to protect the rights of the other spouse.
