Introduction
Trusts and Generational Succession: generational succession is a critical moment for family businesses; a trust offers a flexible and powerful tool for managing this transition, protecting assets and ensuring business continuity.The Trust in Generational Succession
What Is a Trust?
#### Definition and Characteristics
A trust is a legal arrangement of Anglo-Saxon origin, recognised in Italy under the Hague Convention of 1985. It involves one person (the settlor) transferring assets to another person (the trustee) to manage them in the interests of beneficiaries.
#### Essential Elements
- Settlor: the person who establishes the trust
- Trustee: the person who manages the assets
- Beneficiaries: the recipients of the benefits
- Protector: the supervisor (optional)
Advantages in Generational Succession
#### Asset Protection
Assets transferred into a trust are segregated and cannot be claimed by the personal creditors of the settlor, the trustee or the beneficiaries (subject to clawback actions).
#### Business Continuity
A trust enables:
- The business assets to be kept together
- Governance rules for succession to be defined
- The fragmentation of shareholdings to be avoided
#### Flexibility
The following can be tailored:
- The timing of transfers to beneficiaries
- Conditions for access to benefits
- Veto and control powers
Tax Aspects
#### Indirect Taxes
Transfers into a trust are subject to inheritance and gift tax at rates that vary according to the family relationship:
- 4% (with a tax-free allowance of 1 million) for spouses and relatives in the direct line
- 6% (with a tax-free allowance of 100,000) for brothers and sisters
- 8% for other persons
#### Direct Taxes
Income generated by the trust is taxed:
- In the hands of the trust if it is opaque
- In the hands of the beneficiaries if it is transparent
Case Study
A business-owning family with a business worth 10 million euros and three children established a trust that:
- Appoints the eldest son as trustee
- Provides for the gradual distribution of shareholdings over 15 years
- Sets out good leaver/bad leaver clauses
- Includes complementary family agreements
Conclusions
A trust is a valuable tool for succession planning, but requires careful and tailored structuring. The Firm Marzo Associati supports business-owning families at every stage of the process.
Frequently Asked Questions
What is a trust?
A trust is a legal arrangement of Anglo-Saxon origin, recognised in Italy under the Hague Convention of 1985.What are the essential elements of a trust?
- Settlor: the person who establishes the trust
- Trustee: the person who manages the assets
- Beneficiaries: the recipients of the benefits
- Protector: the supervisor (optional)
