On 15 March 2014, the concept of a trust will be introduced into Hungarian law.
This is a major development as Hungary has a continental rather than a common law system and therefore does not recognise the possibility of different owners holding the legal and beneficial title to an asset.
The change will be included within a new Civil Code – the product of a 10-year re-codification process. Under the new Code, a trust will be both a means of transferring ownership for a limited period, and a type of agency contract.
Apart from a few mandatory elements, the rules allow the parties considerable freedom and so may prove attractive to both private and legal persons:
- The trust is not a separate legal personality
- A written agreement is needed to transfer legal ownership of an asset to a trustee
- The agreement must be between the original owner (the settlor), the trustee and the beneficiary, but the same person may perform two roles (with exceptions such as a sole beneficiary not being a trustee)
- The agreement must be for a fixed term (a maximum of 50 years)
- The asset must be transferred for a specific purpose
- The purpose of the trust must be the efficient management of the asset in favour of the beneficiary (in compliance with the rules of agency contracts, not the rules of transfer of ownership)
- As a general rule, claims relating to trust assets may not be brought against the trust by creditors of the settlor, trustee or beneficiary
The trustee’s obligations include:
- keeping the asset separate from its own assets and from any other asset at the trustee's disposal under a trust
- allowing his activities to be inspected by the settlor and the beneficiary
- producing information and accounts on the handling of the trust asset
- producing a final account on termination of the trust
- releasing the trust asset on termination of the trust
The trustee’s powers include:
- power to dispose of the trust asset
- power to disregard the instructions of the settlor and the beneficiary
- power to charge a fee and recover expenses
Detailed rules are still required setting out how the new Code is to be implemented in practice. This includes:
- a supervisory and regulatory regime for trustees
- professional rules for trustees.
- allowing trustees to be registered as owners in state registers (such as the companies register, land and property register, vehicle register etc)
- taxes and levies payable on trust assets