Legal Risks And Precaution Of Domestic Family Trusts

Family trust is the important tool for wealth inheritance and protection,is the urgent demand of domestic high net worth individuals,is the breach of the trust industry transformation.Began around the year 2013,the domestic family trust develops slowly,the present development status of main rendering for the standardization of products,mainly in cash class family trust,asset appreciation as the main purposes of the trust.Domestic family trusts in terms of its related parties,the provisions of the trust contract,there are legal risks in operation process,prevent the legal risk has its practical significance,on the one hand,can provide theoretical research of the domestic family trust thinking direction,on the other hand can provide legal problems encountered in precaution methods.This paper includes three parts:preface,text and epilogue,and the text is divided into four chapters:The first chapter presents the basic legal issues and main legal risks of family trusts generally.Family trust a kind of trust whose purpose is the inheritance and protection of family wealth.From the perspective of bailees,the founding process of family trust includes mainly the selection of bailor,the due diligence investigation of trust program,the establishment of trust project,the signing of trust contract,the consignment of trust property,the management of bailee and the allocation of trust benefit.From the perspective of main components of family trust,the author analyses from subject,object and content.Subject includes bailor,bailee and beneficiary;objective includes trust property and trust benefit;content includes trust purpose and trust behavior.The last part of this chapter demonstrates the legal risks of domestic family trust from the aspect of privy,trust contract and operational process.On the one hand,regulating such risks provides a direction for theoretical research,on the other hand it offers suggestions for practical operation.The second chapter discusses about the legal risks and precaution of domestic family trust privy,which mainly includes bailor,bailee and beneficiary.The bailor is able to reserve his/her rights in family trust.But too much reserved rights would breach the initial purpose of family trust and fail to achieve the function of isolation of risks.Therefore,the false trust and fraud trust system from Britain and America should be used as reference to restrict the reserved rights of bailor in domestic family trust.The bailee is the person who can actually manages and applies the trust property directly.If the bailee violates trust obligation,the benefits of bailor and beneficary will be harmed greatly.Therefore,various trust relief methods should be applied to restrict the nonperformance of bailee.The beneficiary only has trust beneficiary right.It is hard to participate in the management of family trust and the benefits are easy to be encroached.The establishment of family trust supervisor system can protect the benefits of beneficiary effectively.The third chapter introduces the legal risks and precaution of the trust contract in domestic family trust.There are mainly two legal risks in domestic family trust contract:the first one is the unclear entry-into-force time of family trust contract will obscure the time nodes of obligations and rights of bailor,bailee and beneficiary,which goes against the normal operation of family trust.Therefore,it is needed to make the entry-into-force time of contract clear:whether it is the time when trusted property transferred or the time promised by bailor and bailee;the second one is the legal risks of irrevocable clauses in family trust contract,which mainly reflected in that whether it is legal to set irrevocable clauses in family trust.The author thinks firstly that family trust contract does not fully equate to commission contract and secondly commission contract is able to set irrevocable clauses,which means that it is not illegal to set irrevocable clauses.The fourth chapter talks about the law risk and precaution in the operating process of domestic family trusts.On the issue of common property of husband and wife,if they want to set family trust during the time marital relation exists,both of them need to consent the establishment of family trust.On the issue of creditor performs right of revocation,to prevent the risks of the creditor of bailor repeal family trust,on the one hand it is needed to make due diligence investigation on the property pf bailor,on the other hand the bailor should inform the creditor the transfer of trust property.As for the issue of using family trust to do money laundering,to prevent the risks of money laundering,it is needed to make due diligence investigation on the beneficiary the bailor appointed.