Fiduciary trust

Fiduciary trust

Trusts (fiduciary trust “bizalmi vagyonkezelés” in Hungarian) can be an effective solution for securing family assets, managing generational change, regulating inheritance and matrimonial property matters, and for planning the future operation and ownership of assets.

Fiduciary trust as a solution 

• Transferring family property into a trust is a useful way of protecting assets and ensuring the continuity and preservation of assets in the event of the death or incapacity of the head of family, and could therefore be an ideal solution for ensuring the uninterrupted management of family assets, including operational assets and businesses.
• Trusts can also offer an effective alternative solution to business structuring issues and can serve as an alternative in other situations as well (e.g. for the purpose of establishing a holding structure, resolving conflicts of interest when taking up public office, project financing, joint venture-type cooperation, etc.). 
• Under certain conditions, the transfer, management and distribution of the trust property offer favourable opportunities in terms of taxation as well.

The framework of the trust management can be defined by the trustor for the long run (even for the period following his own death) as early as when the trust is set up, and the rules for the distribution of assets can be regulated in great detail and can be adapted in a flexible manner to the current situation from time to time and to changes in family circumstances during the term of the trust. It is important to point out that, in the case of non-business trusts, even the trustor himself or a company formed by him may manage the trust.

A trust arrangement creates a legally binding structure for the trustor(s),trustee(s) and beneficiary(ies) involved. In addition, the preparation and planning stage typically involves an in-depth review of fundamental matters such as succession, division of property within families, inheritance and long-term generational planning, which can also provide an opportunity for establishing the framework for a family constitution that sets out the principles and moral rules of the family.

RSM's trust-related complex services   

Our wealth structuring and estate planning, tax and accounting experts possess extensive experience, providing high quality and complex support not only in designing the optimal trust and wealth protection structure, but also in setting up and managing such an arrangement. 

As part of our advisory services in preparing for setting up a non-business trust, we

• present the areas of use, benefits, taxation and legal specifics of a trust arrangement, tailored to our client's needs;
• explain the legal options for asset transfer, trust management and the distribution of assets;
• draw attention to the relevant decision points and risk factors;
• discuss the timing and costs of setting up the structure.
• present the key taxation issues and tax benefits pertaining to trusts.

In planning the structure, our professionals will carry out the following tasks tailored to our client's specific needs, as required:

• assessing the trustor's intentions and family relationships (from the perspective of matrimonial, domestic partnership property regimes and inheritance law);
• examining the existing company and asset structure and assisting in its optimisation and prior reorganisation, taking into account the possibility of generational change, sale of the company or the involvement of external management, if the need arises; 
• providing support in defining the trustor's short-term and long-term objectives;
• due diligence" of the trust property, including, in particular:

- optional prior reorganisation;

- analysing change of control provisions;

- assessing whether the assets constitute community property or separate property from matrimonial aspect;

• defining internal rules of procedure in the case of an asset management company;
• discussing investment policy principles;
• determining the beneficiaries and sub-beneficiaries of the property;
• discussing the rules for the distribution of assets.

Our legal, taxation, M&A and accounting services in setting up and implementing the trust arrangement include:

• drafting and negotiating the trust agreement;
• establishing a non-business trust company as trustee (as required);
• preparing documents relating to the trust agreement;
• conducting the procedure of notifying the National Bank of Hungary;
• conducting procedures for the registration of changes in the ownership of assets included in the trust property in the relevant registers (company register, real estate register, vehicle register, ship register, etc., as required);
• providing support in opening a bank account for the trust property with a Hungarian or foreign bank.
• preparation of business valuation documentation;
• comprehensive support for the taxation and accounting set-up process.

During the maintenance period of the trust arrangement, our professionals will provide the following support services to guarantee the efficient management of the trust:

• preparation of supplementary asset transfers;
• preparation of legal documents for decisions pertaining to the distribution of assets and related tax advisory;
• acting as a protector, if required;
• ongoing monitoring of effective legal regulations, information on changes and legal advisory, as required;
• making the necessary amendments based on changes in family matters and the property, planning and implementing structuring processes within the trust;
• general tax and compliance advisory relevant for the trust structure;
• informing beneficiaries;
• accounting services for the trust management company and the trust property (book-keeping, record keeping, data reporting).

For the conversion of existing trust structures, our experts will provide the following services:

• due diligence of the trust structure from the legal, taxation and accounting perspectives;
• in case of the conversion of business trusts into fiduciary trust structures (preparation of legal documents, supporting the related change of service provider, book-keeping);
• review of the structure: recommendations on optimisation and setting of detailed rules (e.g. beneficiary system, definition of discretionary powers, investment policies, restrictions).

In providing trust advisory services, our attorneys work closely with the business valuation, tax advisory and accounting experts of RSM Hungary Zrt. to provide our clients with comprehensive and complex wealth planning services.