Key points
The Italian Supreme Court (Corte di Cassazione), in Order no. 34208/2025, held that acts performed by the settlor of a trust are valid and effective only if the settlor's powers are explicitly and precisely provided for in the trust deed. In the absence of express clauses reserving those powers, any subsequent act by the settlor, including amendments to the trust, is ineffective, resulting in the direct transfer of the assets to the original beneficiaries.
Introduction
Estate planning through the establishment of a trust presents a complex challenge, particularly where the settlor wishes to retain a degree of influence over the assets settled into the trust. The delicate balance between asset segregation and operational control has often given rise to divergent interpretations, now clarified by a recent ruling of the Italian Supreme Court (Corte di Cassazione).The Scope of the Italian Supreme Court's (Corte di Cassazione) Order on Trusts
In Order no. 34208 of 26 December 2025, the First Civil Division of the Italian Supreme Court (Corte di Cassazione) set out a fundamental principle: the powers that the settlor intends to retain within a trust must be explicitly stated in the trust deed. Without these express clauses, any subsequent action taken by the settlor, such as amending the trust provisions or introducing new office-holders, is deemed ineffective.The Specific Case: A Family Trust and the Challenge to It
The Italian Supreme Court's (Corte di Cassazione) order arose from a case involving an irrevocable trust governed by Jersey law, holding shares in a company. Years after its establishment by two brothers (settlor and trustee), the deed was amended to introduce a protector with new powers. The protector then requested the termination of the trust, the trustee transferred the shares back to the settlor, and the latter transferred bare ownership to a third party. The original beneficiaries challenged the entire chain of acts, obtaining declarations of ineffectiveness from the Court (Tribunale), the Court of Appeal and the Italian Supreme Court (Corte di Cassazione), resulting in the direct transfer of the assets to the beneficiaries.Relevant Legal Framework: The Hague Convention and Jersey Law
In support of their argument that the trust was void for lack of asset segregation, the appellants relied on two statutory provisions:- Article 2 of the Hague Convention (1985): This article requires assets settled into a trust to constitute a separate fund, held in the name of the trustee, who is obliged to administer them in accordance with the terms of the trust.
- Article 9-A of the Jersey Law (1984): This provision states that the reservation of powers by the settlor (for example, to revoke the deed, instruct the trustee or appoint a new trustee) does not affect the validity of the trust.
Key Distinction: Powers Available in Principle vs. Powers Reserved Under the Trust
The fundamental principle established by the Italian Supreme Court (Corte di Cassazione) is that the law governing the trust indicates only what is permitted _in principle_. It is the express clauses in the trust deed that specifically define which powers are _actually_ reserved to the settlor. In the case examined, the trust deed contained no clause reserving to the settlor the power to amend the trust provisions or introduce new office-holders such as a protector. Consequently, since those powers had not been explicitly set out in writing, they could not be validly exercised, rendering all subsequent amendments and acts ineffective.De Facto Control and the Asset Segregation Effect of a Trust
The Court specified that "de facto control", such as the settlor's participation in company meetings as a director, is irrelevant to the validity of the trust. The asset segregation effect of a trust means that the assets settled into it cease to form part of either the settlor's estate or the trustee's personal estate. A failure in practice (for example, a settlor abusing the power of revocation) constitutes a breach of obligations but does not render the trust structurally invalid.Trusts and Gifts: Two Legal Arrangements with Distinct Legal Bases
The Italian Supreme Court (Corte di Cassazione) also rejected the argument that the transfer of assets to the beneficiaries during the settlor's lifetime constituted a gift that was void for failure to comply with formal requirements (under art. 782 c.c.). The two legal arrangements, trusts and gifts, have different legal bases:- A trust is an instrument for dedicating assets to a purpose through their segregation.
- A gift is based solely on donative intent.
