Understanding Trusts and Deeds of Trust in the Philippines

A trust, often known as a living trust, is a legal arrangement in which one person, the trustee, holds property for the benefit of another, the beneficiary. This arrangement enables asset management and protection while guaranteeing that they are dispersed in accordance with the grantor's preferences. In the Philippines, creating a Trust or getting a Deed of Trust entails a number of stages and considerations.

Photo by Daria Obymaha

Types of Trusts

1. Living Trust (Inter Vivos Trust): This type of trust is established during the grantor's lifetime and provides for asset management while the grantor is still alive. It might be revocable (changeable) or irrevocable (unchangeable).

2. Testamentary Trust: This trust is created through a will and takes effect after the grantor's death.

3. Charitable Trust: Charitable trusts are created to benefit a certain charity or the broader public.

Benefits of Trusts

1. Asset Management refers to the professional management of assets.

2. Trusts are private documents, whereas wills become public records.

3. Avoiding Probate: Assets under a trust can be transferred without going through a lengthy court process.

4. Beneficiary Protection: Ensures that assets are used as intended, especially for minor children and beneficiaries with special needs.

Steps to Establish Trust in the Philippines

1. Identify the Purpose: Determine the trust's goal, such as managing assets for minors, estate planning, or charity donations.

2. Choose a Trustee: Appoint a trustworthy individual or institution to run the trust. This could be a family member, a trusted acquaintance, or a professional trustee from a bank or trust business.

3. Draft the Trust Document: This document outlines the trust's provisions, including the trustee's authority, beneficiary information, and distribution instructions. It is advisable to seek legal counsel to guarantee compliance with Philippine laws.

4. Transfer Assets: Place the chosen assets in the trust. This could include re-titling property, transferring funds, or assigning other assets to the trust.

5. Register the Trust: In some situations, the trust may need to be registered with the proper government body, particularly if it concerns real estate.

Obtaining a Deed of Trust

A Deed of Trust, which is frequently used in real estate transactions, includes three parties: the borrower (trustor), the lender (beneficiary), and the trustee. It secures a loan by transferring the legal title of a property to the trustee until the borrower repays it.

Steps for Obtaining a Deed of Trust in the Philippines

1. Agreement Between Parties: The borrower and lender must agree on loan terms and the use of a Deed of Trust as collateral.

2. Drafting the Deed: A legal document is created that details the terms of the loan, the property used as collateral, and the roles of the borrower, lender, and trustee.

3. Signing and Notarization: The Deed of Trust must be signed by all parties and then notarized to assure its legal validity.

4. Registration: The Deed of Trust must be registered with the appropriate Registry of Deeds in the Philippines to notify the public of the security interest in the property.

5. Compliance with Regulations: Ensure that all requirements established by the Land Registration Authority and other regulatory organizations are met.

Legal and Financial Advice

Given the complications of setting up a trust or getting a Deed of Trust, it is critical to seek legal and financial counsel. They may assist in navigating the regulatory landscape, drafting essential documentation, and ensuring compliance with all legal obligations.

Trusts and Deeds of Trust are effective tools for asset management and protection in the Philippines. Individuals can guarantee their assets are handled according to their preferences by understanding the many types of trusts and taking the right measures to establish one, providing their beneficiaries with security and peace of mind.