Research On The Legal System Of Trustee Of Testamentary Trust

Since the promulgation of the Trust Law of the People’s Republic of China in2001,China’s trust industry has created tremendous commercial and social value after years of accumulation.A survey demonstrates that the size of China’s high net worth population has exceeded 3 million people,and the size of investable assets has exceeded 90 trillion yuan.The increase in the income level of residents has also prompted the demand for property management,especially after death.The first testamentary trust established by a trust company in China was set up by Beijing International Trust Co.,Ltd.in December 2018,filling the business gap of trust companies in the field of testamentary trust in China.Testamentary trust system was involved in Civil Code of the People’s Republic of China for the first time,specifying that natural persons can establish a testamentary trust in accordance with the law.However,except for principle legal provisions in the Trust Law and the Civil Code,there are no special rules and judicial interpretations for testamentary trust in China.In this paper,I use literature analysis to sort out the opinions of various schools of thought,in order to dig into the implementation status of the legal system of trustee in China,review the information and seek measures to solve the current problems;compare the system of trustee of testamentary trust in foreign countries,and use the analysis method of comparative research to summarize the reliable experience and inspiration of the system of trustee in foreign countries.The testamentary trust system is a combination of the testamentary system and the trust system,in which the settlor transfers his property to the trustee by a testament,and the trustee manages the trust property in accordance with the settlor’s wishes.The testamentary trust system has the functions and values of safeguarding the autonomy of the trustee of a testamentary trust,improving the efficiency of wealth transmission,reducing inheritance disputes,and safeguarding the rights and interests of beneficiaries.The development of testamentary trust system in China,especially the trustee system of testamentary trust,is still imperfect compared with other countries.Due to factors such as imperfect theoretical accumulation,imperfect institutional regulation and poor public awareness,there are some issues in the design of the legal system of trustee,which are exposed in practice,such as imperfect supporting systems of trust monitors,trustee disciplinary and taxation systems,resulting in relevant practitioners’ reservations about the implementation of the system,the lack of awareness of this system,and the pace of development of testamentary trust is slow and the business is still not widespread.Based on the introduction of the current status of trustee-related legal system and practical cases,the dilemmas of the trustee system of testamentary trust are as follows:Firstly,the regulations on the selection of trustees of testamentary trusts are inappropriate,and the law provides that when the trust document does not agree on the manner of selection of new trustees,the beneficiaries and their guardians will select the new trustees,which tends to relatively ignore the fiduciary purpose of the settlor;secondly,the duty of prudence and effective management is lack of standards.How to judge the meaning of prudent and effective without the corresponding legal and judicial interpretation,which makes it difficult for judges to deal with judicial disputes;thirdly,the law has fewer penalties for trustee’s misconduct.The beneficiaries cannot hold the trustee accountable when the trustee breaches his duties but does not cause damage to the trust property;fourth,the provisions on taxation of trustees are unclear and the subject of taxation has not yet been clarified,which has the possibility of double taxation and increases the tax burden of establishing testamentary trust;fifth,the supervision mechanism for trustees is missing,and most of the supervision rights stipulated in the Trust Law cannot be realized after the death of the settlor,while the beneficiaries have no control over the trustee based on information asymmetry and lack of professional knowledge.In practice,the abovementioned problems are likely to cause the court to hold the trustee accountable.The above-mentioned problems are likely to lead to excessive discretion of the court in practice,and the vague and broad system is prone to cause judicial injustice.Considering that the current dilemma in theory and practice regarding the trustee system of testamentary trust in the process of specific legal application,suggestions are as follows: First,to explore the system of diversified participation of relevant institutions in the selection of trustees,to make use of the fair and impartial characteristics of courts,civil affairs departments and notary institutions,and to build a system of participation of third-party institutions with credibility in the selection of trustees;second,to refine the trustees’ prudence and effective management obligations,restrictive regulations on the investment directory and expected benefits of investments,to avoid trust property being used for unregulated high-risk investments,and trustees should also adhere to the principle of not abusing their authority;third,to clarify the responsibilities of trustees and improve relevant relief mechanisms.The premise of the beneficiary’s exercise of the right of revocation should not be limited to the trustee causing loss to the trust property,and if no loss is caused,penalties should be increased regarding the trustee’s refusal to perform its obligations or improper performance of its trust obligations and other circumstances that do not directly cause loss to the beneficiary.It should also improve the relief mechanism for the trustee’s infringement of the beneficiary’s rights and lien for improper remuneration and benefits;fourth,it should clarify the provisions on the trustee’s taxation and establish a system of taxation for testamentary trusts,using the form of transfer without taxation or tax relief,with the trustee declaring taxation and withholding payment when the beneficiary is not yet determined,and then deducting the tax amount from the trust benefits after it is determined.At the same time can also be compared to the public trust to give the trustee tax benefits;fifth,to set up a supervisor system for testamentary trust.Testamentary trust can refer to the trust supervision system in the public trust,and clarify the status of the testamentary trust supervisor,qualifications,rights and obligations,selection,resignation as well as termination.