The new trust law of San Marino: a new law on trusts or a new model of trust?
Andrea Vicari
Studio Legale e Notarile Vicari
San Marino
San Marino recently enacted its statute of March 1 2010 (No 42) on trusts (the Trust Law).
The Trust law completely revises the prior trust law in force (March 17 2005 No 37).
A trust may be created by written instrument, inter vivos or by will.
In the case of beneficiary trusts, the trust deed shall contain, in addition to the standard requirements for trust deeds in other jurisdictions:
i) the identification of the beneficiaries, or the criteria which enable them to be identified, or the identification of the person who has the power to appoint them;
ii) the rules which ensure that there is a protector, empowered to take the claim against the trustee in case of breach if for any reason there are no beneficiaries in existence, and in the other cases provided for by law.
The rule under ii) applies both when beneficiaries are appointed but not in existence (i.e. 'the children of Paul', where Paul has no children at the time of the trust settlement) and when no beneficiary is appointed at all (i.e. 'trust beneficiaries are to be appointed by Paul before the end of the trust period').
With this provision, two very relevant effects are introduced:
(i) this rule insures that trustee's duties are enforced during the life of trust, even if no beneficiary is yet born. Delayed enforcement often means no recovery. An enforcer for absent beneficiaries, will ensure timely enforcement.
(ii) by thus rule, the new Trust law creates a new type of trust for beneficiaries, unknown to any other trust law in the world.
A valid trust for beneficiaries, both fixed or discretionary, can be created even if no certain or ascertainable person is intended to be benefited by the trust at the time of its creation.
In this manner, individuation and identification of any type of beneficiaries can be postponed, even in trust for beneficiaries, up to the end of the trust period.
A trust is valid and trusts assets are segregated, without any resulting trust arising in favour of the settlor, even if no person is a certain or ascertainable beneficiary. Trustees's duties, as long as beneficiaries are absent, are enforced by the enforcer.
This is the first of several indicia making clear that, under the San Marino law, a new model of trust is born.
Under the new San Marino trust law, the trust is considered a pure instrument to segregate assets, to imprint on them a destination, dropping the standard Common law idea of a trust as a gift over time to beneficiaries or as an instrument to enrich them either individually or as a class, both under fixed trusts and discretionary trusts
As Paul Matthews put it, under the English model of trust: "Whatever subject matter of the trust, it no longer belongs to the settler or (obviously) the testator, and the decision whether to enjoy it or destroy it is no longer for him. Instead, it is ultimately a decision for those who benefit from the trust." That's why they are enriched by the creation of the trust.
If, under San Marino law, a trust can be created without appointment of beneficiaries, there is settlement of assets into trust, but no gift to anyone.
According to article 50.2 of the Trust Law, only if the trust instrument does not provide otherwise, may a beneficiary require the trustee in writing to postpone the transfer of trust assets to the beneficiary or to make the transfer to a third party nominated by him. Therefore, the Trust law places in the settlor's hands the decision whether beneficiaries can direct distribution differently from the settlor directions contained in the trust deed, with regard to time or persons, of the trust assets.
According to article 50.3 of the Trust Law, only if the trust instrument does not provide otherwise, may all the beneficiaries require the trustee to terminate the trust. Therefore it is in the settlor's hands to decide whether beneficiaries can terminate in advance the trust.
Confirmation that, under the San Marino Trust Law, the trust is an appropriation of segregated assets according to the settlor's programme, can be also found in the rule under article 51.2 providing that only if the trust instrument does not otherwise provide, may a beneficiary alienate, charge or otherwise dispose of, in whole or in part, his beneficial interest by instrument or instruments taking effect as against the trustee when he becomes aware of it or them, or, in the case of a beneficiary with a fixed interest not limited to his life, by will.
Under a traditional English or international trust law, where trusts are viewed as a gift to beneficiaries, these latter entities are always entitled to take legal action against the trustee in case of breach. They are the beneficial owners of the trust property because the settlor, with the creation of the trust, wished to enrich them. Therefore, they shall be entitled to enforce the trustee's fiduciary duty in case of breach. Under San Marino law, it is the settlor that, in the trust deed, can attribute or remove the entitlement of a beneficiary to take legal action against the trustee, according to article 42. Of course, a trust deed cannot deprive all beneficiaries and the protector of the right to take a legal action against the trustee. At least one person with this entitlement has to remain.
In no way, hence, it can be said that the trust enriched the beneficiaries, under San Marino law, if the settlor does not want. In fact, the settlor can exclude the entitlement of a specific beneficiary to take legal action against the trustee.
The San Marino Trust Law created a new model of trust. It is not simply a new trust law, drawing inspiration from several international trust laws enacted in recent years.
This model of trust leaves to the settlor the power to decide completely the programme of appropriation of the trusts assets as he wishes, without being bound by any rule deriving from the traditional common law idea that the trust is a gift over time to beneficiaries.
This idea is of a pure civilian tradition. Civilian settlors are not at odds with the trust, with the gift over time idea embodied in the common law trust. They are able to appreciate the value of segregation for their assets and are able to appreciate the value of drafting an appropriation programme for these assets, but they do not want to enrich the beneficiaries immediately. They want to 'dominate' the beneficiaries' but will not be 'dominated' by the beneficiaries' will.