What is and how use a Mexican Trust ?

Mexican trust or Fideicomiso for realty needs

Mexican Trust is the Legal form used in Mexico by foreigners to buy and protect real estate in Mexico or to invest in properties all around the Mexican territory .With more United States citizens owning property in Mexico and with the population of the United States increasingly having a large Mexican component, it is increasingly common to have the issue of Estate Planning or ownership of real estate require some involvement of Mexican law.

United States citizens, long used to utilizing living Trusts, expect that their advantages may be useful in Mexico .

This is how a mexican Trust or mexican Fideicomiso is structured : 

1. The Essential Transfer. By virtue of a trust, a person,

named “fideicomitente” or “settlor,” transfers to a trustee, the entitlement to one or more assets or rights to be destined to legal and determined purpose, the fulfillment of which is entrusted to the trustee. The formation of a trust must always be evidenced in writing. Once an asset is contributed to a trust, such asset ceases to be the property of the settlor and becomes the property of the trust, forming part of the trust’s assets.

 

2. Parties. 

In order to form a Mexican trust, a settlor and trustee are required. Unlike the law in the United States, a Mexican trust may be valid even if no beneficiary is named in the act of its incorporation, as long as the trust’s purpose is lawful and determined. The role of each of these parties may be described in further detail as follows:

a) The Settlor is the party, which can either be an individual or a legal entity, who incorporates the trust and contributes the assets which will become a part of the trust’s assets. In certain cases the judicial or administrative authorities may act as settlors. Generally, the settlor designates the beneficiaries as well as the members of the technical committee of the trust (both figures will be described in further detail below).

b) The Trustee is the party responsible for receiving the trust assets, and has the obligation to maintain them and use them for the sole purpose or purposes for which the trust was incorporated. As opposed to other trust systems in the world, Mexican law reserves this capacity exclusively to banking institutions, and in certain cases, to other financial institutions which are entitled to act as trustee under Mexican law.

c) The Beneficiary is the individual or legal entity having the right to receive the product of, and be benefited by the trust. The settlor and beneficiary may be the same person; however, unlike the United States, and except for the guarantee trusts, the trustee may never act simultaneously as beneficiary and trustee.

d) In addition to the parties set forth above, there are two figures which play certain operating roles in a Mexican trust: the trustee delegates and the technical committee.

Since the trustees are legal entities, they may not personally carry out their responsibilities, and such responsibilities necessarily have to be performed through a representative. Such representative of the trustee is known as trustee delegate. The trustee delegates are responsible for performing the actions necessary to fulfill the purpose of the trust in the name and on behalf of the trustee. Trustee delegates must additionally comply with certain requirements set forth by law for their appointment.

The technical committee is the management body of the trust. Generally the technical committee is appointed by the settlor for the purpose of following-up and instructing the trustee in connection with the purposes of the trust. However, occasionally such committee is appointed by the beneficiary, depending on the nature of the trust.

It is readily apparent that the Mexican trust is far more complex, far more regulated and, due to the need for multiple entities and parties, much more cumbersome and expensive than the streamlined United States counterparts which have formed the basics of the typical estate planning for an American family. Further, since banks are required to be the Trustees and charge an annual fee, the use of trusts in Mexico is often more expensive if done when the settlor is still alive.

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