A Study On The Legal Issues Of Testamentary Trust

Against the backdrop of a steady increase of national wealth and of agingpopulation, the wealth accumulated by the first generation of entrepreneurs aregradually being passed on to their offspring. The non-specificity and rigidity of thecurrent Inheritance law of the PRC and inheritance system call for the introduction ofnew approaches to the inheritance of wealth. The transplantation of the system ofTestamentary Trust, its many distinctive merits formed and tested countless timesthrough centuries of legal practice in Anglo-American countries has yet to prove itssuccess in mainland China. The system of Testamentary Trust, first established in theTrust Law of the PRC enacted in2001, has been significantly hindered in itsdevelopment and proved ineffective in Chinese legal practice. While a traditional EastAsian culture, an immature trust industry, and obstacles inherent in the current legalsystem all contribute to such hinderance and ought to be dealt with for such a mode ofinheritance of wealth to take root, a legal reformation shall take priority. Issues withdouble taxation on trust, effectiveness of trust upon registration of the trust property,compulsory requirement for specialized institutions, and "commission" rather than"transfer" of the trust property to the trustee, to name a few, continue to be a seriousimpediment to the evolvement of the Testamentary Trust system in mainland China.As a result, with amendment yet to be made to the Trust Law of the PRC and relevantjudicial interpretations yet to be issued, such topics as practical ways to avoid andtackle the potential legal risks of Testamentary Trust and feasible legislative measures and institutional improvements to pave the way deserve our full attention.This thesis consists of five chapters. Chapter I introduces several typical cases toshed light upon and summarize major legal issues concerning the Testamentary Trust.Chapter II offers an overall picture of the Testamentary Trust system, with threesections respectively devoted to an exploration of the history of Testamentary Trust,an identification of the Testamentary Trust through a comparison between theTestamentary Trust and Inter Vivos Trust and a summary of the advantages ofTestamentary Trust. Chapter III further analyzes the legal issues revealed in Chapter Ifrom the perspective of Testamentary Trust theories, and attempts to come up withsuggestions and recommendations for both the legislature and legal practitioners. Andat last makes a general summary.