THE TRUST ESTABLISHED FOR THE TRANSFER OF ASSETS TO THE HEIRS IS NOT IN CONTRAST WITH THE SUCCESSION AGREEMENTS PROHIBITION

By recent ruling n. 18831 of 12 July 2019, the United Sections of the Supreme Court of Cassation, confirming the opinion unanimously accepted by the doctrine, have definitively established the nature of an inter vivos act (“deed between living parties”) of the trust established for the purpose of transmission of wealth, to the beneficiaries, at the moment of settlor’s death.

The matter raised to the attention of the Supreme Court, in this case, concerned precisely whether it is possible or not, in our system, to validly establish a trust for the sole purpose of transferring the assets to the beneficiaries (future heirs) from the moment of the death of the settlor.

This question was raised in the light of the increasing use of the institution in question, as an alternative to the will, in the planning of the wealth generational transmission, in consideration of particular needs such as, for example, the maintenance of the profitability of the business or, also, the protection of the entrepreneur’s wealth and, more generally, of the personal wealth of the settlors.

From here has come the need to understand whether we are in front of an inter vivos act, as such lawful, or of a succession agreement, as such prohibited by our legal system.

The Court, in an attempt to answer the question, moves its arguments precisely from the relationship between a trust of this kind – which only prima facie seems to be a mortis causa deed – and the prohibition of succession agreements pursuant to Art. 458 of the Italian Civil Code, by virtue of which, in order to guarantee the principle of full revocability of testamentary dispositions, a person cannot dispose of his (future) inheritance with any act other than a will, which means through acts that, somehow, deny or attribute rights on a succession not yet open.

To this regard, the Court finally expresses itself in the sense of the existence of a substantial diversity between succession agreements and trusts. What leads to exclude that the trust is a succession agreement lies precisely on the fact that, through the funding of the trust, the settlor transfers his assets to the trustee by means of an inter vivos deed, foreseeing immediately a further transfer of the same assets to the beneficiaries of the trust, after his death.

Evidently, therefore, the final result is different: in the succession agreement, the transfer of assets actually takes place upon the testator’s death, while, in the trust procedure, the transfer by the settlor (i.e., his impoverishment, functional to the enrichment of beneficiaries for a spirit of generosity) is immediate, so that the assets transferred by settlor to the trustee will not concur in any way to the formation of the deceased’s estate.

This is what is stated by the abovementioned ruling: “the trust doesn’t entail a mortis causa transfer of the settlor’s substances, as the trust is established by an inter vivos act, and causes a transfer of assets from the settlor to the trustee, who has the fiduciary duty to manage those assets and to devolve them to the beneficiaries at the end of the trust. The beneficiaries acquire the trust’s assets directly from the trustee, and not by mortis causa succession from the deceased”.

Substantially, therefore, the secondary devolution, from the trustee to the final beneficiaries, constitutes only the consequential implementation segment of an operation already consolidated at the initial moment (of the trust constitution). With respect to this operation, the death of the settlor does not constitute the causal element justifying the transfer of assets to the beneficiaries, but the mere executive moment of a plan according to which they receive the assets assigned to them directly by the trustee.

In the light of the above considerations, the Court definitively cleared the conflict between the kind of trust under examination and the succession agreements prohibition, confirming the full admissibility of it, as it does not prejudice the provisions under art. 458 of Italian Civil Code, due to the fact that the death of the settlor only concerns the identification of the moment of the trust’s assets final attribution, and does not overwhelm the cause of the transfer, which continues to be found in the trust institution and funding.

With respect to a subject of such great relevance, the ruling under examination still offers other food for thinking, as it takes a step forward regarding the legal qualification of this kind of trusts, where it make reference to another decision of the United Sections concerning atypical gratuities, also known as indirect donations or non-donating gratuities (see UU.SS. 27 July 2018, no. 18725).

In fact, the Supreme Court did not limit itself to consecrate the lawfulness of such kind of trusts, but, sharing the doctrine’s consolidated opinion, it leaded the relevant transfers under the terms of an indirect donation pursuant to Art. 809 of Italian Civil Code, specifically as a “liberal trust among living parties”: The enrichment of the beneficiaries is carried out by the settlor through an indirect mechanism consisting of the creation of a private law duty (of the trustee), whose holder – also holder of the segregated assets corresponding to the endowment of the trust – is invested with the fiduciary task of providing the beneficiaries with the financial advantages provided for by the deed of trust.

Thanks to the clarifications, in the terms described above, by the United Sections, the trust lends itself, more and more, to serve as an ideal tool for a timely and solid planning of the events related to the intergenerational transfer of important wealth and entrepreneurial assets. Very often, such transfer are characterized by the onset of sharp contrasts between the heirs (sometimes implying lethal repercussions on the consistency and profitability of what was hardly built by the predecessors), while, instead, with the help of adequately skilled advisors, they can be resolved even before they arise, and in an extremely efficient manner, with regard to both the family balances and the fiscal effects of the intergenerational transition.

Author: Giulia Loi

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Contributing Advisors