On The Function Of Bankruptcy Isolation Of Trust Property

Bankruptcy isolation is a unique function which trust system owned. It means that during the whole existence of a certain trust, the trust property is isolated not only from the bankruptcy of the testator, but also from the bankruptcy of the trustee and the beneficiary. The function of bankruptcy isolation is originated from the independence of trust property, which is an innovation when the Civil Law countries tried to transplanted the trust system to deal with the conflicts between the "Dual Ownership" theory of Anglo-American Equity Law and the "one thing, one right" theory of the Civil Law. According to the principle of independence of trust property, the trust property could be isolated from bankruptcy of all parties of trust, the trustee is also bear limited responsibility if he made the obligation of faithful when he deal with the trust services, and such conflicts between the creditors' benefit of parties and the function of bankruptcy isolated should be coordinated. In our law system, there are some legal obstacles to the realization of the function of bankruptcy isolation of trust property: in specific operation, the moral hazard of trustee may impede the realization of this function; If this function been abused, we cannot always insist on that the trust property is independent, because it will damage others' rights, then we should use other law to relief the abused rights, in order to respect the fair of law. Under our Trust Law, the relationship between testator and trustee is "agent" but not "shift", which makes the legal status of trust property unclear. So in order to make this function be achieved, we should use the confrontation theory in our registration system, make it clear that which property should be registered, which department should perform this responsibility, so as to re-establish our registration system.