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Sunday, December 4, 2022

Trusts: what are they, what are their advantages and the most common uses

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For this reason, and given that trying to write everything on the subject in a note would be truly impossible, we decided to list the most important aspects of trusts.

What is a trust?

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The trust is neither more nor less than a contract, whose legal framework is established in the Civil and Commercial Code (article 1,666 contains the definition and the parties involved). It is a legal figure other than a company and has no personality.

Who is involved in a trust?

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There are two parts: the trustee (which will be the person or persons who transfer property, amount of money or rights to another person) and the trust (who is the one who receives, is in charge of the administration and who will be assigned tasks and obligations based on the purpose of the trust).

In addition, there are two other figures: the beneficiary (who receives the benefits during the term of the contract) and the trustee (who will be designated to receive the goods once the contract ends).

What are trusts used for?

It is, without a doubt, a very useful tool in the legal world, since it is used for multiple businesses. Among the most prominent uses are:

  • Manage assets: in this case, they are assigned to the trustee to be administered and managed according to the project in question. Its main characteristic is that it protects personal assets (real estate, company shares, financial assets, etc.) from third-party attacks due to labor lawsuits, embargoes or any other legal conflict.
  • Obtain financing in the stock market: Simplifying its operation, it can be said that this trust is created to carry out a certain project for which investors are attracted to contribute capital in exchange for interest, which will be granted once the project is finished.
  • Establish guarantees without the need to use a pledge or mortgage: having the same guarantee effect as a pledge or mortgage, These trusts allow you to lower the cost of credit (since, to execute this guarantee, it will not be necessary to go to Justice) and savings in notary expenses.
  • For inheritance purposes: With this trust, the family patrimony is protected and the succession process is avoided. It is a structure with greater organization and possibly shorter terms to be able to dispose of the goods.

What are the advantages of trusts?

One of the main aspects of the trust to be highlighted is that it creates a differentiated affectation patrimony. This, as we count, can be used for various types of businesses.

What does it mean? That the assets that make up the trust assets are protected and, in principle, cannot be affected by the particular obligations of the settlor or trustee.

Likewise, it cannot be affected by the bankruptcy of any of them, since neither party owns the assets. Another positive point for this figure, without a doubt.

As if that were not enough, there are also other benefits, among which are:

  • Tax advantages (although it will depend on the structure that is given).
  • Agility, speed and flexibility at birth and the activity to develop.
  • Lower costs of constitution and execution.
  • Confidentiality (since it is not necessary to publish it, although it does register).

Now they are prepared to be able to talk about trusts. They can even think of establishing one to take advantage of all the advantages offered by this legal tool.

Legal Junior of Expansion Business.

Source: Ambito

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