Trust in Spain, what is it and what is it for?
Processing a trust in Spain may seem like a complex process, but with the right information, it is easier than you think. However, some do not know what a trust is, what a testamentary trust means, or the different types that exist. As a Notary in Barcelona specialised in inheritances, today we explain it to you in depth.
What is a trust and what does it mean?
The trust in Spain allows the transfer of ownership of assets to a person (trustee) and also establishes that the ownership of those assets will later pass to a different person.
A very common example of a trust in inheritances between spouses in Barcelona is the appointment of one member of the couple as trustee and the children as beneficiaries. Therefore, one heir is named directly and another indirectly, ensuring that the assets reach the final recipient.
You can learn more about this situation at the following link:
With the previous example we have illustrated the meaning of testamentary trust, but there are also other types of trusts in Spain that are not related to inheritances with trusts.
It is important to know that the operation of trusts in Spain, although it has some common features, is not equivalent to the trust under Anglo-Saxon law or the law of the United States of America.
Who is the trustee, fiduciary, and settlor?
Mainly, in this hereditary transmission there are 3 figures: the beneficiary, the trustee and the settlor.
Who is the Trustor (or settlor)?
It is the person or entity that creates the trust (the settlor) and transfers assets or rights to it, establishing the conditions under which they will be managed.
Who is the Trustee?
It is the person or institution who will be the first owner of the fiduciary assets. They may have to meet some requirement, such as properly preserving the assets so that they subsequently pass to the beneficiary.
Who is the trustee?
He is the beneficiary of the trust, that is, the person or entity who will receive the benefits or ownership of the assets upon the fulfilment of the established conditions, once the trustee ceases to be the owner of the assets. In this case, they are usually a fully entitled owner, without any obligation.
The Testamentary Trust
In this case, trust and will are closely related, as we have seen previously. The testator is offered a tool so that the management and distribution of their assets are controlled and the instructions they wished for after their death are ensured.
There are different types of testamentary trust:
1. Conditional Trust and Term Trust
The difference lies in when the assets are delivered. In a conditional trust, the transfer of the estate depends on a specific event (for example, a graduation). In a term trust, it is based on the passage of time established by the testator (for example, turning 18 years old for the delivery of assets).
2. Pure Trust and Residual Trust
On this occasion, the difference lies in the management of assets. Thus, in the pure trust, the trustee is required to preserve the estate, being able to enjoy the assets but not being able to transfer them to another person. Conversely, in the residual trust, the trustee has full powers to do whatever they want with the assets, so the beneficiary will only receive something if the trustee has not transferred the assets.
3. Revocable Trusts and Irrevocable Trusts
Finally, we distinguish the capacity that the testator has to modify or control the assets after the appointment of the trust. When we talk about a revocable trust, the testator can cancel or modify it. However, in an irrevocable trust, no changes could be made.
Living trust
This other type of trust in Spain occurs during the lifetime of the testator or settlor. Its main advantage is that it avoids testamentary succession, saving time and money. For example, it could be granted when a settlor (with full powers) appoints a trustee for the administration of their house for when they are not competent (although in this case a power of attorney could also be granted, in the living trust the inheritance to third parties is established).
Real Estate Trust, Living Trust and other types
Although the testamentary trust is one of the most common types of trust in Spain, we also distinguish:
- Real estate trust: occurs under the same conditions with the particularity that it is a trust that involves real estate.
- The investment trust: is used to invest money in different assets such as shares, real estate, bonds, among others, with the aim of generating profits. The income is received by the trustees and later the beneficiaries will receive full ownership of the assets.
- Guarantee trust: serves to ensure the fulfilment of an obligation or debt. In this case, the assets are handed over to a trustee with the purpose of guaranteeing that an agreement is fulfilled, such as the repayment of a loan.
- Philanthropic trust: is established in case of donations or contributions to non-profit organisations to finance charitable works, social projects or even educational scholarships.
The trust contract
The formalisation of the trust is established by granting the known disposition, trust agreement or contract. It is granted and drafted as a trust before a Notary to obtain the necessary legal validity, usually by signing an open will before a Notary.
When someone grants a trust, they must define the terms and the people who will benefit from the trust. Likewise, the assets to be placed in trust must be included.
Documentation for a notarial trust
The following will be required:
- ID card of the settlor, trustee and beneficiary.
- Deeds relating to ownership of real estate, valuation of other properties, shares or bank accounts.
- Additional documentation depending on the type of trust.
Questions about the trust
The cost of establishing a trust in Spain varies depending on several factors, including the complexity of the trust, the value of the assets involved, and the terms to be included. In general terms, if it is done in a will, it will be included in the price of the will. Wills nowadays usually do not exceed one hundred euros, with the most common cost being no more than 70 euros.
At JLA Notarios we always apply the notarial fee schedule, which are the costs established by law for Notaries, and we must charge the exact amount set by law.
If you need to protect your assets from creditors, carry out controlled estate planning, avoid lengthy succession processes, or obtain certain tax benefits, it is a better option.
You can learn more about the convenience of making a will at this link: Why is it advisable to make a will before a notary?
Indeed, it is common for it to be granted in families with minor children or children with special needs with the aim of ensuring that the assets are managed appropriately. Also in people who want to protect their assets or have control over how they will be managed in case of illness or incapacity.
The Trust Agreement before a Notary in Barcelona
Do not hesitate to contact us for more information about trusts in Spain, as it is a very broad topic with many legal connotations. We will help you assess which type of succession is most convenient in your case to suit your needs.
Our Notary service for inheritances specialises in the trust contract in Barcelona before a Notary. Trust us with your hereditary succession and send us an email at bcn@jlanotarios.com, use the contact form on our website or click the WhatsApp button to learn more.
