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My WILL be done – even after my DEATH


Accord­ing to the Aus­tri­an Law on Pri­va­te Trusts, a pri­va­te trust is a legal enti­ty bene­fi­cia­ry of capi­tal from its creator. The trust must be used and mana­ged to ful­fil the pur­po­se deter­mi­ned by its creator. The pri­va­te trust repres­ents total assets without an owner that ser­ve a spe­ci­fic pur­po­se. Assigning capi­tal to a pri­va­te trust occurs using a pro­cess of dona­ti­on or via a legal tran­sac­tion trig­ge­red by a death. Right of owners­hip of the assets is trans­fer­red to the pri­va­te trust from the per­so­nal sphe­re of its creator. From this moment on the assets are sub­ject to the will of a Trust Board who­se task is to regu­lar­ly mana­ge the assets to ful­fil the trust’s goal.

The rea­sons to estab­lish a pri­va­te trust are nume­rous. It’s an alter­na­ti­ve to inheri­tance law and pro­vi­des ano­t­her opti­on to the often unwan­ted con­se­quen­ces of asset dis­tri­bu­ti­on. The capi­tal of the trus­tor can be main­tai­ned as a sin­gle unit even after their death and doesn’t necessa­ri­ly have to be divi­ded in the wake of rea­ding the will. Howe­ver, the pro­ceeds from the assets can be used to sup­port fami­ly mem­bers and a select num­ber of peop­le by inclu­ding a bene­fi­cia­ry clau­se. Today, a pri­va­te trust is rare­ly crea­ted for pure­ly fis­cal rea­sons; the taxa­ti­on reforms car­ri­ed out over recent years have stron­gly limi­ted the bene­fi­cia­ries of pri­va­te trusts, thus losing most of their all­u­re from a fis­cal perspective.

A pri­va­te trust is a legal enti­ty. The pri­va­te trust’s assets are trans­fer­red upon being appro­ved by the trus­tor. The mini­mum assets in a trust are 70,000 EUR. Crea­ting a pri­va­te trust and trans­fer­ring capi­tal are car­ri­ed out via a trust cer­ti­fi­ca­te – a nota­ri­al instru­ment regis­tered at the com­mer­cial regis­ter court which can be view­ed by ever­yo­ne. The trust amend­ment cer­ti­fi­ca­te isn’t public; that’s why, nor­mal­ly, trusts are crea­ted with the bare mini­mum and all other decisi­ons are exclu­ded from public view. The pur­po­se of the trust is deter­mi­ned in the trust cer­ti­fi­ca­te. The Trust Board is respon­si­ble for mana­ging it. The trus­tor or trus­tors can be mem­bers of the Trust Board. The pro­ceeds from the trust can, as long as the pur­po­se of the trust fore­sees it, be used to sup­port the bene­fi­cia­ries. A bene­fi­cia­ry can­not be a mem­ber of the Trust Board.

The trans­fer of assets to the trust trig­gers a 2.5% inco­m­ing trust tax. This equals a capi­tal trans­fer tax: the trans­fer of capi­tal isn’t cur­r­ent­ly collec­ted in Aus­tria by natu­ral enti­ties. You also have to con­si­der the trans­fer of tan­gi­ble assets which isn’t such an easy mat­ter to sol­ve, espe­cial­ly on the art mar­ket. The trust, repre­sen­ting one’s total assets, and its inco­me are sub­ject to a 25% cor­po­ra­te tax – unless it fol­lows an appro­ved or com­mon goal. The allo­wan­ce for the bene­fi­cia­ries is sub­ject to a 27.5% capi­tal gains tax and is taxed like the pay­ment of divi­dends by a limi­ted com­pa­ny, inte­rest on savings, or pro­ceeds from bonds. When ana­ly­sing the­se fis­cal ele­ments, it beco­mes clear that fis­cal advan­ta­ges aren’t the only rea­son to crea­te a pri­va­te trust.

Howe­ver, thanks to pri­va­te trust, it’s still pos­si­ble to main­tain lar­ge art collec­tions pre­ser­ved as one sin­gle unit. Moreo­ver, the art objects are sub­ject to the manage­ment and respon­si­bi­li­ty of experts appoin­ted to the Trust Board. When trans­fer­ring the assets, the trus­tor will descri­be the goal to be reached with said assets. The art cea­ses to belong to the collec­tor, yet it’s still sub­ject to the trustor’s will until the goal of the trust is chan­ged. Amen­ding the trust’s goal can be car­ri­ed out by the trus­tors and trig­ge­red by the death of the trus­tor. If the trus­tor wis­hes to have his rights and will respec­ted even after pas­sing away, he should pro­tect them by rely­ing on a fur­ther legal entity.

The pri­va­te trust is the­re­fo­re a sui­ta­ble legal insti­tu­ti­on to pro­tect and main­tain one’s total assets. The trus­tor can defi­ne the trust’s goal and have his will respec­ted even after pas­sing away.

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Written by

Steuerberater, Certified Public Accountant, Universitätslektor, Prüfungskommissär der Kammer der Wirtschaftstreuhänder.

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