The Legal Construction Of Testamentary Trust In China

The testamentary trust originated in medieval England, its history was so longeven earlier than the creation of contract law. In Common Law system, theTestamentary Trust is a fiduciary relationship refers to an arrangement created by awill or by an inter vivos declaration through which trustees take title to property forthe purpose of protecting or conserving it for the beneficiaries under the ordinary rulesapplied in chancery or probate courts.Embryonic form of the testamentary trust is the “Use” which created in12thcentury England, it’s designed to resolving the argument of land ownership in wartime,and later developed as the main tool to avoid the restriction of inheritance. Till theearly16thcentury, the deceleration of the Use Code finally admitted testamentary trustofficially. Modern testamentary trust is mainly used for property management andfamily wealth heritage; also it has additional advantages such as avoiding the probateprocedures, hiding private properties, saving tax reasonably and other special features.Comparing to the traditional wills、bequest、commission contract、company limitedsystem, the testamentary trust have much more advantages. The most prominentfeature of this rule is that the owner of the property can hold his willingness with fullrespect and at the meantime ensure that the trust property can transfer to thebeneficiaries safety without being squandered or depleted. So the testamentary trusthas been widely used for wealth management and inheritance in developed countries.The Testamentary Trust structure is so ingenious and can provide the perfectcomplement to testamentary succession and legacy distribution system, the study on“localization” should be imperative. At the meantime, with the economy growing up,citizens’ individual capital rising, how to make the property effective inheritance isthe great desire and demand of the social market, and the government don’t wantthese huge national wealth get waste or lose either, the “localization” design of theTestamentary Trust will reform our economic system and totally break the “wealthwill never over three generations” curse. However, view back to our legislative andjudicial status, it is not difficult to find that China has no real sense of thetestamentary trust system, even to the positioning of the trust system is abnormalcognitive. In practice, since the trust system initial designed in our country has beenover three decades, although with the rapid development of China’s economy the trustindustry’s capital increased, but the trust industry in China is still only played the function of financing, only offered help for the commercial capital accumulation. Intheory, the trust law is promulgated in2002, there are many omissions anddeficiencies in the specific construction, concluding there is no surrounding law andnational policy support to the trust, theoretical foundation is not sufficient tolocalization the Testamentary Trust Legal System. The content of the testamentarytrust system mainly include three stages: the establishment, operation and termination.At the beginning of the establishment, one can use a trust contract or will tocreate a testamentary trust. Unlike the strict legal procedures of traditional wills, theeffective establishment of the testamentary trust is much easier, only needs theconsensual relationship of Testamentary Trust Deed. However, as the tool of wealthheritage, the separation of the trust property individually and then make a real transferto the trustee is definitely necessary by creation of the trust contract；and if thetestamentary trust create by a will, the will must be valid. In conclusion, the effectiveestablishment of the testamentary trust needs the agreement between parties and theproperty transfer behavior.In the operational stage, the testamentary trust configured rights and obligationsbetween the parties in a middle of the road trend balanced of the interests in different.The trust settlor’s free will was extremely enlarged, making it not only can indicate theuse of the property and the ultimate beneficiary in his lifetime, but also can manipulatethe trust property after his death, this is the special “Dead Hand” in testamentary trust.Due to the double ownership stucture, the testamentary trust pays more attention on thetrustee’s fiduciary, coz he holds the legal title to manage the trust property anddistribute the interests to the beneficiaries. The trustee must strictly enforce theobligations for the benefit, any breach of conduct will make the beneficiaries or thetrust property itself claim for compensation. Testamentary Trust will not eventually runout of the trust initial purposes---property inheritance, so to protect the interests of thebeneficiaries is the center of this system. To achieve this aim, Testamentary Trust offerstrust property and beneficiaries a full range of legal protection. The first is theindependence of trust property, which separates the trust property from the settlor andtrustee’s individuals can prevent the enfocement by creditors. Second, thebeneficiaries has not only have the right to gain trust interests, but also have the rightto exclude prejudice and abuse the right to relief based on the equitable title on trustproperty. Not only can claim for compensation of damages by the breach of fiduciary but also can get the breaching obligation behavior revoked.At the termination stage, except to focus on the provisions of termination reasonleading to trust relationship, Testamentary Trust cares about the property heritage atmost. If any fact cause the termination, the trustee must first account and report to thebeneficiaries, and then after pay all the debits trustee should make the final trustproperty transfer to the beneficiaries. The transfer time and the effect of ultimateownership of the trust property is the core issue of Testamentary Trust terminationstage. These specific setting rules reflects the testamentary trust system in the pursuitof individual freedom, economic freedom and limited liability, value orientation needsto make a balance between freedom and responsibility.To sum up, the thesis will study on the context of reality of Testamentary Trust incommon law as the start of the research, through the method of historical evolution,comparative analysis, empirical research method and economy law value analysismethod, according to current situation of our country, will take the Testamentary Trustsystem "localization" in China as the ultimate research target, hoping offer someopinion of consummation and revision for our inheritance law.