What Is a Personal Trust?

Personal trust is the symmetry of "legal person trust". Trust business with natural persons as trustees. This trust business is not widespread in China at this stage, but it is more prevalent in western countries and old China. The main contents are: (1) Execution of will and management of estate. (2) Guardianship of incapacitated persons, such as minor orphans, incapacitated older persons, and persons with mental disorders. (3) Escrow property, which is mainly entrusted to manage property for people with busy affairs and people with disability. (4) Personal securities investment. (5) Financial consultation, accepting personal consultation on the safekeeping and use of property, investment, trading, quotation and tax payment. Personal trusts can be divided into "live trust" and "back trust" according to their effective period. ^[1]

Personal trust

Individual trusts are centered on various property rights, and transfer their assets including money, securities, real estate and other assets under their name to the trustee (trust institution) to perform various management operations in accordance with the trust deed in order to achieve the intended trust purpose. Due to the highly flexible and confidential content of the personal trust, the trustee can retain control of the trust's property. Through proper planning, the trust property will not be affected by factors such as the death or bankruptcy of the trustee, and at the same time, it can enjoy The professional investment control of a trust institution has various advantages that are difficult for other single financial products or services to achieve. ^[2]

personal

For property management, personal trusts not only increase the channels for investment and financial management, but also achieve the following specific purposes:

1. Preserve property and accumulate wealth

The property right is transferred to a professional trust institution through a trust contract, and the professional staff performs planned investment management according to the contract content, so that the property can give full play to its cumulative effect, without losing the opportunity to create wealth due to the premature dispersion or loss of property. At the same time, according to the Trust Law, the creditors of the trust property shall not request enforcement or auction of the trust property; furthermore, the trust property does not belong to the trustee bankruptcy consortium. In addition, the creditor's rights of the trust property shall not be claimed to be offset with debts that are not part of the trust property.

2. Take care of the survivors and benefit their children and grandchildren

Personal trust replaces post-mortem inheritance, avoiding disputes over inheritance and taking care of future generations.

3. Designate beneficiaries and plan heritage

Personal trusts can replace gifts during life, which can prevent children's squandering of property, children's disputes caused by unfair distribution, children's dependence on their children, and children's lack of management ability can cause the family property to shrink and depreciate. The replacement of the right of inheritance by the trust beneficiary right can better implement the will of the heirs.

4. Property planning and tax saving function

Individual trusts can provide comprehensive trust planning including investment, insurance, tax saving, retirement planning, wealth management and other purposes based on each person's trust property and trust financial management purposes, to meet the needs of individuals and their families at different stages, and to properly plan property for the client .

There are many types of personal trusts, which can be divided either for the purpose of trust, in the form of trust property, or for the life of the individual. That is, the most commonly used classification forms of personal trusts are living trusts and after-life trusts. This is a unique division of personal trusts.

1. Living trust

A living trust is set up by the client when he is alive. Its trust purpose includes property planning, property appreciation and tax considerations.

2. Behind trust (testament trust)

A testament trust is established in the form of a will. The effective date is when the client has inherited the fact. The purpose is to distribute and manage the estate.

1.Various purposes

For individuals, each person has different amounts of property, different forms of property, and different goals.

2. The trustee can be a legal person or an individual

In the personal trust business, as long as the trustee meets the legal requirements for the trustee, he or she can act as the trustee of the personal trust.

3. From the perspective of the duties of the trustee, in the personal trust business, the trustee first accepts the trust property and manages the property to ensure its value-added or preservation. Secondly, the trustee often also assumes the responsibility of the beneficiary itself.

4. There are both business trusts and non-business trusts in personal trusts.

The early personal trusts were all non-business trusts. The trustees accepted the trusts mainly because they had a close relationship with the trustees. The trustees did not receive trust payments for personal friendship. The trustees were mainly individuals. Later, the emergence of trust institutions, many people trust The affairs are entrusted to trust institutions, but non-business trusts still account for a significant proportion. ^[3]