Trusts are commercial organizations managed by individuals who hold the title to the business’ property for the benefit of one or more beneficiaries. The Spanish tax authorities regard trusts as legal entities which must have a business purpose and must operate as a business. The rules that apply to a trust depend largely on the terms under which it was built on. According to the Civil Law, establishing a trust in Spain can be made directly by the members as individuals. Spain has not ratified the Hague Convention of 1985 on the law applicable to trusts and their recognition. Therefore, trusts in Spain are not a recognized legal institution. Our lawyers in Spain can tell you more about the legal provisions applicable to trusts.
The legal provisions for trusts in Spain
The trusts are established in Spain by way of deed (deed of trust) and include: the instructions for appointing trustees, the investment polices to follow, how to determine the beneficiaries, the management and destination of the assets. They facilitate the inheritance process by reducing the effects of “forced heirship” rights, assure that certain persons are protected and keep the family patrimony all together.
An individual or an organization can be a trustee. The obligations of a trustee are:
• To manage and invest the assets held by the trust;
• To take all trust related decisions keeping in mind the beneficiaries’ interests;
• To be liable for all damages occurred as a result of trust management.
Foreign trusts established in Spain are treated under the guidelines of judgments issued by the Spanish courts on the matter. Trusts established in Spain have an independent existence and are not terminated in case of the trustee’s death. Our attorneys in Spain can assist you in the process of establishing a trust and assessing its legal implications.
The main characteristics of a Spanish trust
The Spanish law recognizes several institutions which have similar responsibilities to those of a trust. The most common types of trusts established in Spain are family trusts and trusts regulating mortis causa transfers. The main characteristics of a trust established in Spain are the following:
• The assets of a trust are separate funds and are not part of the personal estate of the trustee;
• The legal ownership is separate from the beneficial rights;
• The trustee or another person on behalf of the trustee (legal ownership) is entitled to the trust’s assets;
• The trustee has the legal power to employ, manage or dispose of the assets under the terms of the trust or in special conditions imposed by the Spanish legislation on the division of inheritance.
For further explanations regarding the legal implications of establishing a trust in Spain, don’t hesitate to contact our law firm.