Short Summary: Leveraging On Trust

“Leveraging on Trust”

By: Yzel P. Magtangob

Keywords: Trust, Investment, Regulations

A trust is a relationship created when one party transfers property to a second party for the benefit of the third party. The property placed in the trust is called trust principal or res. The trustee holds the legal title to the property in the trust and must use the property and any income it produces solely for the benefit of trust beneficiaries. The trust is created by a legal document. (Gitman, L., 1981) Trust is a legal device or arrangement whereby a person delivers part or all of his properties to another person who administers and manages the property for the benefit of designated persons. The term “person” could mean an individual or natural person

Once your trust has been signed, an important task remains. To avoid court-supervised conservatorship proceedings if you should become incapacitated, or the probate process at your death, your assets must be transferred to the trustee of your living trust. This is known as funding the trust. Deeds to your real estate must be prepared and recorded. Bank accounts and stock and bond accounts or certificates must be transferred as well. These tasks are not necessarily expensive, but they are important and do require some paperwork. A living trust can hold both separate and community property. This makes it convenient for spouses and registered domestic partners to plan for the management and ultimate distribution of their assets in one document. (Note: Although registered domestic partners have many of the same rights as spouses, be aware that federal tax law does not provide the same tax benefits for domestic partners as it does for spouses.) If you own real estate in another state, you might (depending on that state’s law) transfer that asset to your trust as well to avoid probate in that other state. A lawyer from that state can help you prepare the deed and complete the transfer. If the real estate is located in California, a California lawyer should prepare the deed and advise you on transferring such property. A lawyer can help you address the transfer of other assets as well. In addition, you should consider changing the beneficiary designations on life

Companies and such should be authorized by the Bangko Sentral ng Pilipinas. BSP sets standards that will sure that the money and assets of the trustors is safe with the trust institution. (Trust Officers Association of the Philippines, n.d.)According to Monetary Board to be authorized an applicant should have a combined capital account of not less than P250 Million excluding the income taxes, reserves and capital adjustments required by the BSP. Therefore, only limited banks and investment houses can perform trust. These requirements are passed to make sure that the authorized banks and investment houses can show their responsive capability in terms of finance. Institutions should “administer the funds or property under its custody with the skill, care, prudence and diligence necessary under the circumstances then prevailing that a prudent man, acting in like capacity and familiar with such matters, would exercise in the conduct of an enterprise of like character and with similar aims.” (Bangko Sentral ng Plipinas, 2008) Included in Prudent-Man Rule, BSP specified rules to limit the placement of the funds in safe outlets like Government Securities such as T-Bills or loans secured by the banks or by mortgage of properties either movable or real estate. Institutions can invest outside of this restrictions only and only if it is disclosed and approved by the clients. To be practical, institutions