A trust is an instrument of Anglo-Saxon origin which has its roots in early Middle Ages England and which allows the segregation of assets (movable and immovable assets) for a specific purpose, often family, humanitarian and moral. It is a particular legal institution that defines the purpose and rules of management of segregated assets by a settlor, administered by a trusted person, fiduciary or trustee, as if he were the owner, i.e. managing the real rights, respecting the rules and the purpose until its transfer to one or more beneficiaries. Sometimes, the trustee’s work can be monitored by an enforcer whose function is to ensure that the trustee manages the trust in accordance with what is established by the settlor in the trust deed.
The trust is not a standard instrument and takes on a different nature depending on its purpose. In the various states of the world, especially in the Anglo-Saxon countries where the instrument has evolved over time, some classifications have been defined according to the purpose and the natural or legal persons involved. For example, if a trust segregates a family asset to ensure future heirs that it will not be attacked by any entity or person until a specific event occurs (e.g. the death of the settlor) it is often called family trust (not to be confused with the will trust, or hereditary trust which is a trust established during life, but which takes shape upon the death of the settlor for the management of the inheritance). There
The difference between a family trust and a will is essentially given by two factors: the assets, in the will, remain in the real right of the settlor and can therefore be attacked by his creditors, while in the trust the assets pass into the real right of the trustee, remaining completely separate from its own assets, and therefore it cannot be attacked either by the creditors of the trustee or by those of the settlor, but exclusively by those of the beneficiaries only when the latter come into possession of it by dissolving the trust (this must not lead to losing sight of the high moral purpose that must characterise a trust, which in this case is to ensure the livelihood of future heirs by protecting the assets intended for them by the settlor). Another example is the pension trust which are used to segregate capital for the purpose of transferring it to the beneficiary upon retirement (e.g. the supplementary pension). In Italy they are represented by pension funds which, similarly to employee severance pay (TFR), are protected monetary assets that cannot be seized until they are paid to the beneficiary when he retires, or when his employment relationship (TFR case).
What are the benefits?
First of all, the capital that is segregated in trust cannot be attacked by any person or creditor body, thus ensuring its total protection until it is transferred to the beneficiaries. For example, in the case of the pension fund which is in fact a trust with the high humanitarian and moral purpose of ensuring the person a livelihood when he retires.
Furthermore, as long as the assets are segregated in a trust, or produce income that flows into the trust itself, it is not a tax-relevant entity as it does not produce the enrichment of any natural or legal person, as also well detailed by the Revenue Agency in the introduction to the CIRCULAR No. 34 /E of 20 October 2022.
Unfortunately, since the trust is not an entity regulated under Italian law, we often do not have the slightest idea of “what it is”, or, we often mistakenly think that it is an exotic, cunning, if not fraudulent “something”. and, especially from a tax perspective, a “something” reserved for owners of large assets or for those who have the resources and knowledge needed to obtain sophisticated professional advice.
Italy is one of the few countries that does not have a law regulating trusts, however it has signed the Hague Convention of 1 July 1985 ratifying it with LAW no. 364 of 16 October 1989, pursuant to which it legally recognises trusts.
The establishment of the trust through a written deed (express trust) can be legalised in Italy pursuant to the Hague Convention of 5 October 1961.
Therefore, although a deed establishing a trust drawn up by an Italian notary, being an Italian deed, is bound by Italian laws and regulations which do not regulate trusts, thus not being able to apply foreign laws and not benefiting from clear and protective legislation, a Italian notary can transpose a trust deed without any limitation or reservation with respect to Italian legal restrictions or prescriptions and can legalize it in Italy pursuant to and for the purposes of the Hague Conventions.
The trusts we establish are trusts based on the international legislation most suitable for the purpose and legalised by Italian notaries who are experts in trusts with whom we have been collaborating for years, training the trustees in the most correct and profitable management of the trust, assisting them in their role with legal and tax advice.
Our network of sector experts will help you create “tailor-made” founding deeds to achieve your objectives, legalise them abroad and subsequently in Italy in accordance with the Hague Conventions.