Trusts According To The Czech Law

Trusts According To The Czech Law

Principle of the trust:

The trust patrimony is an legal institute formed in Anglo-Saxon legal system. Trust has been adopted by in some continental legal systems  including the Czech Republic.

A trust results from an act whereby the settlor excludes part of his property to the patrimony constituted by contact or deed for particular purpose and which a trustee of the trust undertakes, to hold and administer the property. A trustee has the control and the exclusive administration of the trust, and the titles relating to the property of which it is composed are drawn up in his name.

Czech trust servicesThe trust, consisting of the property transferred in trust, constitutes a patrimony by appropriation, autonomous and distinct from that of the settlor, trustee or beneficiary. The trust is anonymous and none of them has any real right to the property.

Any person may increase the trust by transferring property to it by contract or by will in conformity with the rules applicable to the constitution of a trust or law. The person does not acquire the rights of a settlor by that fact.

A beneficiary may have the right on fruits and revenues from the trust or right on property from the trust alternatively right on its shares in proportion to the share of each beneficiary.

Purpose of the trust:

The purpose of the trust can be publicly beneficial or private.

Publicly beneficial trust

Publicly beneficial purpose of the trust does not have the making of profit or the operation of an enterprise as its main object which could be especially cultural, educational, philanthropic, religious or scientific.

Private trust

A private trust is constituted for the purpose of benefit for a determinate person or his memory. The purpose of the private trust could be random including the commercial purpose (investment).

Main advantages of the trust:

  • autonomous ownership;
  • anonymity of settlor and beneficiary;
  • public registers (for example real estate in the real estate cadaster) contain exclusively the name of trustee;
  • safe protection of your property from potential legal claims or actions
  • safe protection from relatives who are not able to duly administer the property;
  • reduction of taxable income;
  • clear or strict rules of administration determined by the settlor;
  • settlor or beneficiary may supervise the administration of the trust;
  • avoiding long heritage proceedings;
  • motivation for your relatives as a beneficiaries for fulfilment of certain conditions (marriage, university degree, etc.);
  • publicly beneficial purpose of the trust;
  • financing your projects.

Termination of the trust

A trust is terminated by the expiry of the term, by the attainment of the purpose of the trust, including fulfilment of determined condition, or by Czech court ruling for example in case of impossibility. A trust is also terminated by the renunciation or lapse of the right of all the beneficiaries.

At the termination of a trust, the trustee shall hand over the property to those who are entitled to it.

Where there is no beneficiary, any property remaining when the trust is terminated devolves to the settlor. Trust may be also transferred to another trust.

Each trust is specific for certain situation and wishes of the settlor of the trust. According to us the introduction of trust into Czech law was very good move forward.