What Is an Improvement Trust?

Handling trust refers to the trust business that changes the nature and original state of the trust property to realize the appreciation of the property.

Processing trust

In handling trusts, the trust property has subrogation, that is, the property can be changed in forms, such as the sale of property into funds, or the purchase of marketable securities. If a processing trust is set up for a house, the trustee can sell the house in exchange for other forms of property. If a processing trust is set up for movable property, the trustee can sell the movable property.

Rights and obligations of the trustee

Trustee qualifications and status

(1) Qualifications

The trustee shall be a natural person and a legal person with full capacity for civil conduct. Where laws and administrative regulations provide otherwise for the conditions of the trustee, such provisions shall prevail.

(2) Status

Fiduciary duties

1. Duties to handle trust affairs

That is, the trustee shall abide by the provisions of the trust documents and handle trust affairs in the best interests of the beneficiaries. The trustee must manage his trust property with due diligence and fulfill his obligations of honesty, credit, prudence and effective management.

2. Obligation not to seek benefits for yourself

That is, the trustee shall not use the trust property for his own benefit except to obtain remuneration in accordance with the provisions of this law. If the trustee violates the provisions of the preceding paragraph and uses the trust property to seek benefits for himself, the income obtained is classified as trust property.

3. Obligation not to transfer trust property to its inherent property

The trustee shall not convert the trust property into its inherent property. If the trustee converts the trust property into its inherent property, it must restore the original state of the trust property; if it causes loss of the trust property, it shall be liable for compensation.

4. Obligation not to trade illegally

That is, the trustee may not trade its inherent property with the trust property or the trust property of different clients with each other, except where the trust documents provide otherwise or with the consent of the client or the beneficiary, and trade at a fair market price . If the trustee violates the provisions of the preceding paragraph and causes loss of trust property, he shall be liable for compensation.

5.The obligation to manage and keep separate accounts

That is, the trustee must separately manage and keep accounts of the trust property and its inherent property, and separately manage and keep accounts of the trust property of different clients.

6.Obligation to handle trust affairs yourself

That is, the trustee should handle the trust affairs by himself, but if there are other provisions in the trust documents or there is a last resort, he may entrust others to handle it for him. Where the trustee entrusts trust affairs to others as agents, he shall be liable for the others' handling of trust affairs.

7. Obligation to keep records

That is, the trustee must keep a complete record of the trust affairs.

8.Reporting obligations

That is, the trustee should report the management, use, disposition and income and expenditure of the trust property regularly to the client and the beneficiary each year.

9. Confidentiality obligations

That is, the trustee has the obligation to keep the trustee, the beneficiary, and the handling of trust affairs and information confidential according to law.

10. Obligation to pay trust benefits

That is, the trustee shall bear the obligation to pay the trust benefits to the beneficiary within the limit of the trust property.

11. Reporting and surrender obligations when duties are terminated

That is, if the trustee terminates its duties according to law, it shall make a report on handling trust affairs and handle the transfer of trust property and trust affairs to the new trustee.

Trustee rights

1. Obtaining the right to remuneration

That is, the trustee has the right to get remuneration in accordance with the terms of the trust document. If the trust documents have not been agreed in advance, supplementary agreements may be made after the trust parties have negotiated and agreed; no compensation shall be charged if no advance agreement and supplementary agreement have been made. The agreed remuneration may be increased or decreased by the trust parties through consultation and agreement. However, if the trustee disposes of the trust property in violation of the purpose of the trust or loses the trust property due to violation of management duties or improper handling of trust affairs, he shall not request compensation until the original state of the trust property is restored or compensation is not paid.

2. Priority for compensation

That is, the trustee shall bear the trust property for the expenses incurred in handling the trust firm and the debts to the third party. Where the trustee pays in advance with its inherent property, it shall have priority to receive compensation for the trust property.

3. Right to resign

That is, in general, after the trust is established, the trustee can resign with the consent of the client and the beneficiary.

Client's rights and obligations

I. Qualification of client

The client shall be a natural person, legal person, or other organization established in accordance with law with full capacity for civil conduct.

Second, the rights of the client

(1) Right to know the situation

That is, the client has the right to know the management, use, disposition and income and expenditure of its trust property, and has the right to ask the trustee to make an explanation.

(2) Access to reproduction rights

The client has the right to consult, copy or copy the trust accounts related to its trust network and other documents dealing with trust affairs.

(3) Adjustment of the right to trust management methods

That is, due to special reasons that were not foreseen when the trust was established, the management method of the trust property is not conducive to the realization of the trust purpose or is not in the interests of the beneficiary.

(4) Requesting the client to restore the original state of the trust property or to give compensation

That is, if the trustee disposes of the trust in violation of the purpose of the trust, or violates the management duties and mishandles the trust affairs, causing loss of the trust property, the client has the right to apply to the people's court to revoke the punishment, and has the right to require the trustee to restore the original status of the trust property or Compensation; if the transferee of the trust property knows that it accepted the property in violation of the trust's purpose, it shall be returned or compensated. The right to apply as prescribed in the preceding paragraph that has not been exercised within one year from the date on which the principal knows or should know the reason for the revocation shall be eliminated.

(5) Dismissal of Trusted Human Rights

That is, if the trustee disposes the trust property in violation of the purpose of the trust, or manages the use of the trust property, or disposes of the trust property with serious faults, the trustor has the right to dismiss the trustee in accordance with the provisions of the trust document, or apply to the people's court to dismiss the trustee.

Third, the client's obligations

Transfer of certain property rights

Rights and obligations of beneficiaries

I. Beneficiary qualifications

The beneficiary is the person who enjoys the trust beneficial rights in the trust. The beneficiaries may be natural persons, legal persons or other organizations established in accordance with the law. The settlor may be the beneficiary or the sole beneficiary of the same trust. The trustee may be the beneficiary, but may not be the sole beneficiary of the same trust.

Rights of beneficiaries

Beneficiaries have the right to benefit.

(1) Right to know the situation

That is, they have the right to know the management, use, disposition, income and expenditure of their trust property, and have the right to ask the trustee to make explanations.

(2) Access to reproduction rights

The client has the right to inspect, copy or copy the trust accounts related to its trust property and other documents dealing with trust affairs.

(3) Adjustment of the right to trust management methods

That is, due to special reasons that were not foreseen when the trust was established, the management of the trust property is not conducive to the realization of the trust purpose or is not in the interests of the beneficiary, and has the right to require the trustee to adjust the management method of the trust property.

(4) Right to cancel and claim compensation

If the trustee disposes of the trust property in violation of the trust purpose or loses the trust property due to violation of management duties or improper handling of trust affairs, he has the right to apply to the people's court to revoke the disposition and has the right to require the trustee to restore the original state of the trust property or to compensate him; If the transferee of the trust property knows that the property was accepted in violation of the trust's purpose, it shall be returned or compensated. However, if the right to apply is not exercised within one year from the date when the beneficiary knows or should know the reason for the revocation, the right to apply shall be eliminated.

(5) Right to dismiss

If the trustee disposes the trust property in violation of the purpose of the trust, or manages the use of the trust property, or disposes of the trust property with gross negligence, he shall have the right to dismiss the trustee in accordance with the provisions of the trust documents, or apply to the people's court to dismiss the trustee.

(6) The right to apply for arbitration when the opinions of the client are inconsistent

When the beneficiary exercises the above rights and does not agree with the client's opinion, he may apply to the people's court for a ruling.

Obligations of beneficiaries

When the trustee suffers losses in the handling of the trust business because it is not his own fault, the beneficiary is obliged to accept the fees or compensation claims made by the trustee.