Editing Trust (law) (section)

== Country specific variations ==
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While trusts originated in England, and therefore [[English trusts law]] has had a significant influence, particularly among [[common law]] legal systems such as those of the [[Commonwealth of Nations|Commonwealth]] or the [[United States]], the impact of trust law has been wide and varied. Even under common law systems, the basic notion of a trust has been implemented in strikingly different ways.

[[Trust law in civil law jurisdictions]], generally including [[Continental Europe]] only exists in a limited number of jurisdictions (e.g. Curaçao, Liechtenstein and [[Sint Maarten]]). The trust may however be recognized as an instrument of foreign law in [[conflict of laws]] cases, for example within the [[Brussels regime]] (Europe) and the parties to the [[Hague Trust Convention]]. Tax avoidance concerns have historically been one of the reasons that European countries with a civil law system have been reluctant to adopt trusts.<ref name=Hansmann1998/>

=== Cyprus ===
Cyprus legislators enacted the [http://www.olc.gov.cy/olc/olc.nsf/all/AF600F7D0BB6F306C2258187001E13D0/$file/The%20International%20Trusts%20Laws%201992%20to%202013.doc?openelement Cyprus International Trusts Law of 2012] with an aim to facilitate the establishment of trusts by non-Cypriot residents. The Cyprus International Trust is based on common law principles however the [http://www.olc.gov.cy/olc/olc.nsf/all/AF600F7D0BB6F306C2258187001E13D0/$file/The%20International%20Trusts%20Laws%201992%20to%202013.doc?openelement Cyprus International Trusts Law of 2012] introduces certain conditions and requirements to for the trust to qualify under the same law. These conditions are:

* The settlor must be of sound mind and of the right age.
* The settlor must not be a resident of Cyprus for at least 1 year prior to the establishment of the Cyprus International Trust.
* The beneficiaries must not be residents of Cyprus for at least 1 year prior to the establishment of the Cyprus International Trust.
* At least one trustee must be residing in Cyprus during the whole duration of the trust.

In addition to above the common law principles of certainty must be present.<ref name="HSharpe-2019a">{{Cite web|url=http://thecypruslawyer.com/cyprus-international-trust/|title=Overview of Cyprus International Trust|last=HSharpe|date=18 August 2019|website=The Cyprus Lawyer|language=en-US|access-date=2019-08-20|archive-date=20 August 2019|archive-url=https://web.archive.org/web/20190820074542/http://thecypruslawyer.com/cyprus-international-trust/|url-status=live}}</ref>

==== Settlor Powers provided by law ====
The Cyprus International Trust Law of 2012 also introduces certain settlor powers which if exercised will not invalidate the trust and or do not need to be inserted in the trust deed for the settlor to exercise them.<ref name="HSharpe-2019a" /> The powers introduced are:

* to revoke or amend the terms of a trust or any trusts or powers arising wholly or partly under it
* to advance, distribute, pay or otherwise apply income or capital of the trust property or to give directions for the making of such advancement, distribution, payment or application
* to exercise the powers of a director or officer or issue binding directions as to the appointment or removal of a director or officer of any company, wholly or partly owned by the trust;
* to give binding directions to the trustee in connection with the purchase, retention, sale, management, lending, pledging or charging of the trust property or the exercise of any powers or rights arising from such property;
* to appoint or remove any trustee, enforcer, protector or beneficiary;
* to appoint or remove any investment manager or investment adviser;
* to change the applicable law governing the trust or the forum for the administration of the trust;
* to restrict the exercise of any power or discretion of a trustee by requiring that they are only exercisable with the consent of the settlor or any other person expressly specified in the terms governing the trust.

==== Duration of Cyprus International Trust ====
Cyprus does not limit the duration of an international trust and it may be formed for an unspecified duration.<ref name="HSharpe-2019a" />

==== Charitable Trust and Purpose Trust ====
In accordance with Section 7, a Cyprus International Trust may be formed for one or more of the following purposes:

* the prevention or relief of poverty
* the advancement of education
* the advancement of religion
* the advancement of health or the saving of lives
* the advancement of citizenship or community development
* the advancement of the arts, culture, heritage or science
* the advancement of amateur sport
* the advancement of human rights, conflict resolution or reconciliation or the promotion of religious or racial harmony or equality and diversity
* the advancement of environmental protection or improvement
* the relief of those in need by reason of youth, age, ill-health, disability, financial hardship or other disadvantages
* the advancement of animal welfare and protection of animals;
* any other purpose beneficial to the public in general or which may reasonably be considered to be relevant to any of above

==== Confidentiality of Cyprus International Trust ====
The law includes specific confidentiality obligations over the trustee, the protector, enforcer or any other person to keep information and details of the trust confidential. This right is waived in the instances that law requires the disclosure of such information or if a judge before which a case is tried in issues a judgment to such effect. Nevertheless, with the changing times, public disclosure of trusts is required in Cyprus.<ref name="HSharpe-2019b">{{Cite web|url=http://thecypruslawyer.com/public-disclosure-of-cyprus-international-trust/|title=Public disclosure of Cyprus International Trust|last=HSharpe|date=18 August 2019|website=The Cyprus Lawyer|language=en-US|access-date=2019-08-20|archive-date=20 August 2019|archive-url=https://web.archive.org/web/20190820074539/http://thecypruslawyer.com/public-disclosure-of-cyprus-international-trust/|url-status=live}}</ref> Such public disclosures are required:

===== Stamp Duty Commissioner for validating the creation of the Cyprus International Trust<ref name="HSharpe-2019b" /> =====
For a trust to be validly constituted it must be presented to the commissioner of stamp duty and a one-time payment of Euro 430 is made. The commissioner does not keep a copy of the document.

===== Regulatory Disclosure of ASPs managing a Cyprus International Trust<ref name="HSharpe-2019b" /> =====
The regulation of the industry providing company and trust management functions (ASP) has also brought about the requirement to disclose to the regulator the existence of a Cyprus International Trust. Such obligation burdens the trust company and the information disclosed is the following:

* The date the trust was created
* The name of the trust
* The name and particulars of the trustee
* The governing law of the trust

For the avoidance of any doubt, the regulator does not require particulars of the Settlor, the Beneficiaries and details of the trusts. Neither does the regulator store in any way the trust deed. On the contrary, they rely on the regulated entity to collect, store and update this information

===== Cyprus Beneficial Owner Register and Cyprus International Trust<ref name="HSharpe-2019b" /> =====
The Prevention and Suppression of Money Laundering and Terrorist Financing Law of 2007-2018<ref>{{Cite web|url=https://www.cysec.gov.cy/CMSPages/GetFile.aspx?guid=94659b77-3789-4866-863a-2d23e4a58ebd|title=The Prevention and Suppression of Money Laundering and Terrorist Financing Law of 2007-2018|date=20 August 2019|website=CySEC|access-date=20 August 2019|archive-date=20 August 2019|archive-url=https://web.archive.org/web/20190820074549/https://www.cysec.gov.cy/CMSPages/GetFile.aspx?guid=94659b77-3789-4866-863a-2d23e4a58ebd|url-status=live}}</ref> introduced mandatory disclosure requirements in respects to trusts. Generally known as the Cyprus Beneficial Ownership Register.<ref>{{Cite web|url=http://thecypruslawyer.com/cyprus-beneficial-ownership-register/|title=Cyprus Beneficial Ownership Register|last=HSharpe|date=18 July 2019|website=The Cyprus Lawyer|language=en-US|access-date=2019-08-20|archive-date=4 August 2019|archive-url=https://web.archive.org/web/20190804175515/http://thecypruslawyer.com/cyprus-beneficial-ownership-register/|url-status=live}}</ref> Subject to this the following information will be required to be mandatory disclosed:

* The settlor
* The trustee
* The protector
* The beneficiary or the class of beneficiaries if they have not been identified yet
* Any other person exercising control over the trust

The actual implementation of this law still remains to be seen however the requirements above are expressly extracted from The Prevention and Suppression of Money Laundering and Terrorist Financing Law of 2007–2018.

===== FATCA<ref name="HSharpe-2019b" /> =====
Under the Foreign Account Tax Compliance Act (FATCA) a Trustee and or a Trust may be classified as a Foreign Financial Institution (FFI) requiring registration with the IRS and disclosure of results on a yearly basis.

===== CRS<ref name="HSharpe-2019b" /> =====
Under the Common Reporting Standard decree, a trust would in most cases classify as either a Reporting Financial Institution (FI) or a Passive Non-Financial Entity (Passive NFE). If the trust is an FI the trust or the trustee will have an obligation to report to its local tax authority in Cyprus in respects to the reportable accounts.

==== Taxation of Cyprus International Trust<ref name="HSharpe-2019a" /> ====
The income and profits derived within and outside of Cyprus are liable to every possible taxation imposed in Cyprus if the beneficiary is a resident of Cyprus in accordance with the Income Tax Laws of Cyprus.

If the beneficiaries are not Cyprus residents then any income and profit derived from Cypriot sources will be subject to tax.

Relevant to consider is what income is subject to taxation in Cyprus and the none domicile regime applicable in Cyprus.

=== England and Wales ===
{{Main|English trust law}}

==== History ====
As noted above, the English trust arose from the court of the [[Lord Chancellor]], known as the [[Court of Chancery]].

There are several features which distinguish the modern English trust both from other common law trusts and from civil law approaches.

==== Purpose trusts and the requirement for a beneficiary ====
{{Main|Purpose trusts in English law}}
In some ways, the modern English trust is, when compared to other jurisdictions, more conservative in its requirements. For example, it retains the requirement that there be a beneficiary.<ref>''[[Re Astor's Settlement Trusts]]'', [1952] Ch 534</ref> There are two main exceptions to this rule: charitable purpose trusts and [[Re Denley's Trust Deed|''Re Denley'' trusts]].<ref>[1969] 1 Ch 373</ref> This contrasts with other jurisdictions like Cyprus, [[Law of the British Virgin Islands|the BVI]], [[Law of the Cayman Islands|the Cayman Islands]], the Isle of Man, [[Law of Jersey|Jersey]] and [[Law of Gibraltar|Gibraltar]]<ref>{{Cite book |last=[[Graham Virgo|Virgo]] |first=Graham |title=The Principles of Equity & Trusts |publisher=[[OUP]] |year=2020 |isbn=978-0-19-885415-9 |edition=4th |location=Oxford |pages=208 |language=en}}</ref> which allow for non-charitable purpose trusts to be valid. This will normally be done by appointing a somebody to act as the trust's [[Protector (trust)|Protector]]. These purpose trusts allow for a trust to be created with a purpose (e.g. 'to provide for ''N''<nowiki/>'s education', where ''N'' is a family member) instead of a named beneficiary. The role of the Protector (also sometimes called an enforcer) is to hold the trustees to account, which the beneficiaries would usually have the right to do.

==== Unincorporated Associations ====
{{See also|Unincorporated association}}
A major use of trusts is to allow for the existence of unincorporated associations. These often are associations or groups of people that come together for a particular (usually non-commercial purpose). Common examples might be local social and sports clubs, some [[gentlemen's club]]s, and some professional associations.

The main way that English law supports the existence of these is by understanding them as a form of trust. The association has no [[legal personality]] (i.e. the capacity to enter into legal relations in their own name). This contrasts with the approach taken in many civil law jurisdictions, like Spain<ref>{{Cite web |author-link=Spain |title=Código de Asociaciones |trans-title=Code for Associations |url=https://www.boe.es/biblioteca_juridica/codigos/codigo.php?id=154&modo=2&nota=0&tab=2#top |url-status=live |access-date=25 September 2022 |website=BOE |language=es |archive-date=25 September 2022 |archive-url=https://web.archive.org/web/20220925163040/https://www.boe.es/biblioteca_juridica/codigos/codigo.php?id=154&modo=2&nota=0&tab=2#top }}</ref> or France,<ref>{{Cite web |author-link=France |date=25 May 2021 |title=Déclaration initiale d'une association |trans-title=Initial declaration of an association |url=https://www.service-public.fr/particuliers/vosdroits/F1119 |url-status=live |access-date=25 September 2022 |website=Service-Public.fr |language=fr |archive-date=25 September 2022 |archive-url=https://web.archive.org/web/20220925163040/https://www.service-public.fr/particuliers/vosdroits/F1119 }}</ref> where civil or social associations are often accorded legal personhood. Thus, in England, the officers of an association (e.g. its chairman, secretary and treasurer) will be recognised as trustees and will hold the assets of the association on trust for the members of the association with the constitution of the association forming the basis of the rules governing the trust.<ref>{{Cite book |last=Virgo |first=Graham |title=The Principles of Equity & Trusts |publisher=[[OUP]] |year=2020 |isbn=978-0-19-885415-9 |edition=4th |location=Oxford |pages=211–15 |language=en}}</ref><ref>''[[Re Lipinski's Will Trusts]]'', [1976] Ch 235</ref>

===South Africa===
In many ways trusts in South Africa operate similarly to other [[common law]] countries, although the [[law of South Africa]] is actually a hybrid of the British common law system and [[Roman-Dutch law]].

In [[South Africa]], in addition to the traditional living trusts and will trusts there is a "bewind trust" (inherited from the Roman-Dutch ''bewind'' administered by a ''bewindhebber'')<ref>[http://www.moorestephens.co.za/images/uploads/trust-overview-gmp-msw.pdf Trust Overview] {{Webarchive|url=https://web.archive.org/web/20130616045840/http://www.moorestephens.co.za/images/uploads/trust-overview-gmp-msw.pdf |date=16 June 2013 }}. Moore Stephens Chartered Accountants.</ref> in which the beneficiaries own the trust assets while the trustee administers the trust, although this is regarded by modern Dutch law as not actually a trust.<ref>Oakley JA. (1996). ''Trends in Contemporary Trust Law'', [https://books.google.com/books?id=VvM-CsSb1EYC&pg=PA108 p. 108] {{Webarchive|url=https://web.archive.org/web/20230430044418/https://books.google.com/books?id=VvM-CsSb1EYC&pg=PA108 |date=30 April 2023 }}.</ref> ''Bewind'' trusts are created as trading vehicles providing trustees with limited liability and certain tax advantages.<ref>{{Cite web |date=2021-02-12 |title=Types of Trust {{!}} South African Revenue Service |url=https://www.sars.gov.za/businesses-and-employers/trusts/types-of-trust/ |access-date=2022-06-12 |language=en-ZA |archive-date=21 May 2022 |archive-url=https://web.archive.org/web/20220521114655/https://www.sars.gov.za/businesses-and-employers/trusts/types-of-trust/ |url-status=live }}</ref>

In South Africa, minor children cannot inherit assets and in the absence of a trust and assets held in a state institution, the Guardian's Fund, and released to the children in adulthood. Therefore, testamentary (will) trusts often leave assets in a trust for the benefit of these minor children.

There are two types of living trusts in South Africa, namely vested trusts and discretionary trusts. In vested trusts, the benefits of the beneficiaries are set out in the trust deed, whereas in discretionary trusts the trustees have full discretion at all times as to how much and when each beneficiary is to benefit.

====Asset protection====
Until recently, there were tax advantages to living trusts in South Africa, although most of these advantages have been removed. Protection of assets from creditors is a modern advantage. With notable exceptions, assets held by the trust are not owned by the trustees or the beneficiaries, the creditors of trustees or beneficiaries can have no claim against the trust. Under the Insolvency Act (Act 24 of 1936), assets transferred into a living trust remain at risk from external creditors for 6 months if the previous owner of the assets is solvent at the time of transfer, or 24 months if he/she is insolvent at the time of transfer. After 24 months, creditors have no claim against assets in the trust, although they can attempt to attach the loan account, thereby forcing the trust to sell its assets. Assets can be transferred into the living trust by selling it to the trust (through a loan granted to the trust) or donating cash to it (any natural person can donate R100 000 per year without attracting donations tax; 20% donations tax applies to further donations within the same tax year).

====Tax considerations====
Under South African law living trusts are considered tax payers. Two types of tax apply to living trusts, namely income tax and capital gains tax (CGT). A trust pays income tax at a flat rate of 40% (individuals pay according to income scales, usually less than 20%). The trust's income can, however, be taxed in the hands of either the trust or the beneficiary. A trust pays CGT at the rate of 20% (individuals pay 10%). Trusts do not pay deceased estate tax (although trusts may be required to pay back outstanding loans to a deceased estate, in which the loan amounts are taxable with deceased estate tax).<ref>E-book: Trusts for Business Owners, by Peter Carruthers and Robert Velosa.</ref>

The taxpayer whose residence has been 'locked' into a trust has now been given another opportunity to take advantage of these CGT exemptions. The Taxation Law Amendment Act of 30 September 2009 commenced on 1 January 2010 and granted a 2-year window period from 1 January 2010 to 31 December 2011, affording a natural person the opportunity to take transfer of the residence with advantage of no transfer duty being payable or CGT consequences. Whilst taxpayers can take advantage of this opening of a window of opportunity, it is not likely that it will ever become available thereafter.<ref>{{cite web | first = Winston E. | last = Miller | title = Dump That Trust Through The Window: Family Trust Tax Window | url = http://www.lawchambers.co.za/article_family_trust_tax_window.htm | date = 18 December 2009 | publisher = Winston Miller Attorneys | access-date = 15 February 2011 | archive-date = 3 June 2010 | archive-url = https://web.archive.org/web/20100603171643/http://www.lawchambers.co.za/article_family_trust_tax_window.htm | url-status = live }}</ref>

=== United States ===
{{Main|United States trust law}}

In the United States, a trust is presumed to be irrevocable unless the instrument or will creating it states it is revocable, except in Pennsylvania, California, Oklahoma and Texas (and any other state that has adopted section 602 of the [[Uniform Trust Code]]), in which trusts are presumed to be revocable unless the instrument or will creating them states they are irrevocable.

In the United States, [[State law (United States)|state law]], variable from state to state, governs trusts. Many states have adopted the [[Uniform Trust Code]], and there are also broad similarities among states' common law of trust. These similarities are summarized in the [[Restatements of the Law]], such as the Restatement of Trusts, Third (2003−08). Additionally, as a practical matter, federal law considerations such as federal taxes administered by the [[Internal Revenue Service]] may affect the structure and creation of trusts.

In the United States the tax law allows trusts to be taxed as corporations, partnerships, or not at all depending on the circumstances, although trusts may be used for [[tax avoidance]] in certain situations.<ref name=Hansmann1998/>{{rp|478}} For example, the [[trust-preferred security]] is a hybrid (debt and equity) security with favorable tax treatment which is treated as [[regulatory capital]] on banks' balance sheets. The [[Dodd-Frank Wall Street Reform and Consumer Protection Act]] changed this somewhat by not allowing these assets to be a part of (large) banks' regulatory capital.<ref>{{cite web|publisher=Skadden, Arps, Slate, Meagher & Flom LLP & Affiliates |url=http://www.skadden.com/Cimages/siteFile/Skadden_Insights_Special_Edition_Dodd-Frank_Act1.pdf |title=The Dodd–Frank Act: Commentary and Insights  |url-status=dead |archive-url=https://web.archive.org/web/20120414222136/http://www.skadden.com/Cimages/siteFile/Skadden_Insights_Special_Edition_Dodd-Frank_Act1.pdf |archive-date=14 April 2012 }}</ref>{{rp|23}}

==== Estate planning ====
{{Main|Estate planning}}
Living trusts, as opposed to testamentary (will) trusts, may help a trustor avoid [[probate]].<ref>{{cite web|last1=Caraway|first1=David|title=Testamentary Trusts|url=http://www.nycbar.org/get-legal-help/article/wills-trusts-and-elder-law/trusts/testamentary-trusts/|website=New York City Bar|access-date=14 December 2017|date=April 2015|archive-date=15 December 2017|archive-url=https://web.archive.org/web/20171215000720/http://www.nycbar.org/get-legal-help/article/wills-trusts-and-elder-law/trusts/testamentary-trusts/|url-status=live}}</ref> Avoiding probate may save costs and maintain privacy and living trusts have become very popular.<ref>American Bar Association. Ch.5 ''[http://www.americanbar.org/content/dam/aba/migrated/publiced/practical/books/wills/chapter_5.authcheckdam.pdf Living Trusts] {{Webarchive|url=https://web.archive.org/web/20130616193731/http://www.americanbar.org/content/dam/aba/migrated/publiced/practical/books/wills/chapter_5.authcheckdam.pdf |date=16 June 2013 }}''. Appears to be online copy of: ''[https://archive.org/details/americanbarassoc00amer The American Bar Association guide to wills and estates]'' (1995). See also [http://www.americanbar.org/content/dam/aba/migrated/publiced/practical/books/wills/chapter_4.authcheckdam.pdf Ch. 4, Trusts] {{Webarchive|url=https://web.archive.org/web/20130616202020/http://www.americanbar.org/content/dam/aba/migrated/publiced/practical/books/wills/chapter_4.authcheckdam.pdf |date=16 June 2013 }}.</ref> Probate is potentially costly, and probate records are available to the public while distribution through a trust is private. Both living trusts and wills can also be used to plan for unforeseen circumstances such as incapacity or disability, by giving discretionary powers to the trustee or executor of the will.

Negative aspects of using a living trust as opposed to a will and probate include upfront legal expenses, the expense of trust administration, and a lack of certain safeguards. The cost of the trust may be 1% of the estate per year versus the one-time probate cost of 1 to 4% for probate, which applies whether or not there is a [[Intestate|drafted will]]. Unlike trusts, wills must be signed by two to three witnesses, the number depending on the law of the jurisdiction in which the will is executed. Legal protections that apply to probate but do not automatically apply to trusts include provisions that protect the decedent's assets from mismanagement or embezzlement, such as requirements of [[surety bond|bonding]], [[insurance]], and itemized accountings of probate assets.

==== Estate tax effect ====
Living trusts generally do not shelter assets from the [[Estate tax (United States)|U.S. federal estate tax]]. Married couples may, however, effectively double the estate tax exemption amount by setting up the trust with a formula clause.<ref>The formula clause may be: "I leave to my child the maximum allowable amount that is not subject to federal estate tax, with the remainder going to my wife." As of 2013, transfers to spouses are exempt from estate tax. See: [https://www.forbes.com/sites/deborahljacobs/2013/01/02/after-the-fiscal-cliff-deal-estate-and-gift-tax-explained/ After The Fiscal Cliff Deal: Estate And Gift Tax Explained] {{Webarchive|url=https://web.archive.org/web/20170926173028/https://www.forbes.com/sites/deborahljacobs/2013/01/02/after-the-fiscal-cliff-deal-estate-and-gift-tax-explained/ |date=26 September 2017 }}. ''Forbes''.</ref>

For a living trust, the grantor may retain some level of control to the trust, such by appointment as [[protector (trust)|protector]] under the [[trust instrument]]. Living trusts also, in practical terms, tend to be driven to large extent by [[tax]] considerations. If a living trust fails, the property will usually be held for the grantor/settlor on [[resulting trust]]s, which in some notable cases, has had high tax consequences.{{Citation needed|date=March 2013}}