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Trust Asset Management: This is how it works exactly

Tartalomjegyzék Trust management in the Hungarian legal systemThis is how it works in practiceIn what cases can it be useful? Trust asset management is a great help if you want to increase any material or monetary value and know how to be completely safe. Fortunately, modern regulations allow us to entrust the management of our […]

Trust asset management is a great help if you want to increase any material or monetary value and know how to be completely safe.

Fortunately, modern regulations allow us to entrust the management of our assets even entirely to an expert who will help manage it in their own way. The need for this usually arises if we want to see the highest possible return on a larger amount with the least possible investment of time, or if we want to keep our ownership role in a company from the background, privacy, so that we do not have the burden of managing the company. .

In our writing we describe the process and conditions of this.

Trust management in the Hungarian legal system

Since 2014, domestic regulations have provided a wide range of opportunities to involve a trustee. The subject of this can be not only monetary value, but also real estate, movable property, or active receivables. These can be transferred to a trustee at the same time or in steps, all you have to do is make sure that we specify the process and conditions of this in the related contract. The contract itself can only have a fixed term and can be concluded for a maximum of 50 years.

Types of fiduciary management

The Hungarian legal system distinguishes between business-like and non-business-like asset management. In the case of business-like asset management, the manager is a financial service provider that has undergone the registration procedure of the MNB (Magyar Nemzeti Bank), which must comply with the MNB’s requirements. These are available in detail here: https://www.mnb.hu/letoltes/bizalmi-vagyonkezelo-vallalkozasok-tevekenysegenek-engedelyezese-1.pdf

What is important to emphasize is that financial services companies do not have any reporting obligations to the MNB, they do not control them in detail. Likewise, the contracts they enter into are confidential and only need to be recorded by the service company.

The non-business of wealth management concerns, if our assets are transferred into the hands of a trusted, whether it be a natural or legal person. In such a case, of course, we take a greater risk, as the relevant regulations are looser than in the case of business-like asset management. In addition, ownership must be relinquished, as it is transferred to the trustee – in return, a closer relationship of trust can be maintained.

This is how it works in practice

There are three actors in fiduciary management:

  • the trustee: who makes the property for treatment available to the trustee.
  • the trustee: manages the assets made available to him on an ad hoc or non-occasional basis. It can also be a natural or legal person (eg a financial services company).
  • the beneficiary: the asset is managed for his benefit, ie he receives the returns generated as a result of the treatment. It could even be the estate agent himself.

The subject of asset management may be the following, even several items:

  • Movable or immovable property
  • Property rights
  • Securities
  • Receivable (may be overdue or not expired)

In the process, the ownership of the property or assets to be managed is transferred to the trustee, who is also authorized to manage it, exercise the right to sign it, or otherwise manage it. The trustee may not normally have a say in the method of treatment, but may at any time request insight into the process and the results achieved.

In what cases can it be useful?

It is usually customary to turn to a trustee for business reasons to maximize expected profits or to keep private affairs safe. This usually happens in the following cases:

Business protection

If, as an owner, we want to manage a company from the background, the trustee can not only act on behalf of the company, but can also act as its representative, taking on public appearances, among other things. In the case of multinational companies, where the ownership structure is spread across the world, a trustee is able to manage the business in a unified manner and act on behalf of the owners, thus making it easier and unhindered to operate.

After an unexpected, unfortunate death, the management of the company may be suspended for a long time until the issue of inheritance is settled under current regulations. A trustee, on the other hand, can continue to run a company even in such difficult times, bridging the transition period and preventing economic damage to the company.

Security

Since ownership passes to the trustee, it may be a good idea to entrust a trustee if you want to know it in complete safety. This is because impatient creditors cannot get their hands on it, thus reducing the level of such risk. But in the same way, we can be protected from a former husband or wife in the event of a divorce if we entrust part of our assets to a trustee in accordance with the marriage contract.

Charity asset management

In Hungarian law, it has recently been possible to set up an open-ended foundation for asset management purposes, so donations can be managed under favorable administrative and financial conditions and generate a return. In such a case, the contract is usually terminated by the depletion of the property or the attainment of a predetermined purpose.

Taxation of assets under management

As already mentioned, the property managed is not part of either the estate or the matrimonial property community. This, in turn, does not mean that it is not subject to taxes. Non-commercial assets may be subject to the following types of taxes:

  • general sales tax
  • Business tax
  • Corporate Tax
  • Building and land tax
  • duty

For the assets managed, the trustee must request a separate tax number and must also fulfill the associated obligations (i.e., payment of taxes). He also handles the related documents and handles any tax refunds. Its obligation is terminated upon termination of the contract by the Civil Code. according to its current provisions.

All in all, fiduciary management can be extremely beneficial for us if we are in such a life situation that we would do better with it, even at the cost of treatment, than if we tried to manage it ourselves. Fortunately, Hungarian law has already created the legal background for it.