The Trust for support to disabled people and their families: the facilities provided in the law n. 112/2016

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1 Thursday, June 22, 2017 CIRCULAR The Trust for support to disabled people and their families: the facilities provided in the law n. 112/2016 Index Goals of the law The Trust: an overview of the instrument Tax benefits provided for in the law dated June 22, 2016, n. 112 Other instruments introduced by the law: contratto di affidamento fiduciario and vincolo di destinazione Goals of the law In the presence of disabled people, the concerns of parents are all facing conditions of care and assistance, that the disabled person can have in case the parents, or whoever's in charge, are no longer able to do so due to illness, old age or accident death. It is precisely form this need that the Italian legislature, noting the dramatic problems experienced by families, for designing the moment when they will not be able to offer assistance to loved ones suffering from severe disability, has approved the law dated June 22, 2016 n This law represents an appreciable response to the need to protect people with certified disabilities established under Law 104/92, with the specific purpose of promoting the welfare, full social inclusion and autonomy of people with disabilities, which finds its ratio in the implementation of some basic principles

2 of constitutional status, in the Charter of fundamental rights of the European Union and in the United Nations Convention on the rights of persons with disabilities. Recipients of the law are therefore, as mentioned, people with severe disability established by the appropriate medical certificate (within the meaning of article 3 of the Law 104/1992), for which they need a permanent, ongoing and comprehensive assistance. Basically it must be a pathological disability, not determined by natural aging or pathologies associated to senility, with no family support because without parents or because they themselves are not able to bear the responsibility for their assistance. The law, to respond to the need to provide adequate assistance, care and protection, pursues macro goals, represented basically by avoiding the institutionalization of such people, with certified disability, establishing a fund to realize the assistance project, as well as promoting some provisions aimed at facilitating the establishment of "segregated" assets, for people with severe disabilities, whereby these assets are essentially insensitive both to the events that characterize the person who brings the assets - because the latter loses their availability -, both to the events which relates to the beneficiary. Trust: an overview of the instrument Among other things, the law encourages the use of trusts, an act based on a relationship of trust between the parties involved, with an Anglo-Saxon origin but who had full legitimacy in our country following the ratification of the Hague Convention dated 1 July 1985 on the law applicable to trusts and on their recognition, which occurred on October 16, 1989 with law n 364 which entered into force on 1 January The constitution of a trust begins with the creation of the constituent instrument, also known as unilateral act: in this act, the settlor manifests his will, by defining clearly the purpose of the trust, duties and powers of the trustee, and the beneficiaries. Several people are involved. Settlor He is the one who takes the initiative to establish the trust. He defines the purpose, rules, appoints the trustee and establishes the beneficiaries or rules to identify them. The settlor may also be a plural subject, such as a group of people setting up a fund to manage in trust. Generally, in the case of disabled beneficiaries, the settlor is a parent, alone or with the spouse, that understands the needs of the disabled child, and therefore is able to give correct guidance on life habits and demands to the trustee so that the latter may play its role properly, especially when the settlor will no longer exist or no longer be able to assist the disabled. Trustee The trustee is the trustee of the trust that manages the conferred assets to the benefit of the beneficiary, or the weak person to be protected. It is the only figure that can't miss for the constitution of a trust. The trustee is holder of rights and powers attributed to him by the settlor under a relationship of trust. In general, the trustee is chosen among people near to those who has to be protected. This because, in his function, the trustee shall not be bound by purely economic logic, but should take up the emotional and social sphere of the weak person. For the trustee, therefore, the human contact that establishes with the disabled person becomes the key of reliability and competence. The trustee has powers

3 established in the founding act, which affect the integrity of the Fund, and of managerial powers relating to the administration of the Fund. The trustee must give a report of his activity, but by virtue of the trust relationship with the settlor, he normally has autonomy in the management of assets. He is obliged not to use them for his needs: the utilities resulting from the management of the Fund are allocated to the beneficiary. Beneficiary The beneficiary is the individual who is protected through the establishment of the trust. In general, therefore he enjoys the benefits that result from assets transferred into the special Fund. The trustee guarantees the monitoring, care and maintenance of the beneficiary by the incomes of assets, or dealing with the person directly. Protector The value that transpires from trust also calls into question another figure: the protector. It is a subject with the task of monitoring the activities of the trustee, making sure they perform as set forth by the settlor. In this way he monitors the moral aspect of the trust, which is the commitment to ensure the mental well-being of the disabled person, as well as the economy, ensuring that the trustee uses the Fund in trust exclusively according to the plan specified by the settlor and exclusively to meet the economic needs of the disabled. According to the trust, the protector may have different tasks. He can provide trustee guidance and directives, giving consent to perform certain acts, be heard before a decision is particularly delicate in respect of the beneficiary, but he never substitutes the trustee. Tax benefits provided for in the law dated June 22, 2016, n. 112 The trust, but only if "structured" in accordance with the requirements contained in article 6 of the law, are recognized a number of important benefits from a fiscal point of view: exemption from inheritance and gift tax; fixed application of stamp duty and transfer of mortgage assets and rights; exemption from stamp duty for all acts adopted or required; in case of transfer of real estate and real rights on the same real estates, the ability of municipalities to establish exemptions or reduced rates for IMU; more "advantageous" conditions for donations, gifts and other acts at no charge made by individuals in respect of the trust. In order to apply the said benefits, the trust must, however, comply with some pretty stringent conditions. Paragraph 2 of article 6 provides that the exemptions and reductions introduced by law are eligible provided that the trust pursues as exclusive goals the social inclusion, the care and support of people with severe disabilities, in favor of which the trust is established and as such exclusive purposes, it must be expressly stated in the deed of trust. In addition, as a result of the provisions contained in the following third subparagraph: the deed of trust must be made by public act; the deed of trust must clearly and unequivocally identify the parties involved and their respective roles; describe the capabilities and the specific needs of people with disabilities in favor of which the trust is established; indicate the welfare activities necessary to ensure the care and meeting the needs of people with disabilities, including activities aimed at reducing the risk

4 of institutionalization of people with disabilities; It must also identify the obligations of the trustee, with regard to the project of life and wellness goals that he must promote for people with severe disabilities, by taking all appropriate measures to safeguard the rights, as well as indicate the obligations and accountability borne by the trustee; exclusive beneficiaries of the trust must be people with severe disability; goods of any nature provided in the trust must only be used for the realization of the purposes of the charitable trust; the deed of trust will need to determine the subject who controls (protector) the obligations imposed to the trustee upon the establishment of the trust; the deed of trust shall provide for the final term of duration of the trust corresponding to the date of death of the person with severe disability. The deed of trust can determine the destination of the remaining assets to other parties. In this event, it will be subject to taxation in force at the time of the termination of the trust. The recognition of exemptions and tax advantages to the trust is subject to the fact that the trust is solely dedicated to the needs of the disabled person. Other instruments introduced by the law: contratto di affidamento fiduciario and vincolo di destinazione The law codified other appropriate instruments to achieve the effect of separate assets for the benefit of the disabled person, such as the contratto di affidamento fiduciario and vincolo di destinazione ex article 2645 ter c.c.. As we shall note in detail, they are apparently similar to the trust but differ in several aspects. In the vincolo di destinazione can, for example, be conferred registered assets in public registers, real estate or rights in rem, whereas in the trust can be conferred any right, so even money, shares, paintings. Therefore, if the assets in the vincolo di destinazione cannot generate income that can support even from an economic point of view the disabled person, this instrument is not suitable to meet the protection and assistance of person with disabilities. In addition, the trust does not prevent the sale of assets (usually disabled people benefit from the income of property, but in some cases it is useful to dispose of part of the assets to gain income for the disabled person). The important thing is to achieve the purpose, which in the trust is indicated. No guarantee of implementation of the aim instead for the vincolo di destinazione. The contratto di affidamento fiduciario is a bilateral act (not unilateral as the trust) by which a person agrees with another person the identification of certain types of property to be used for the benefit of one or more people on the basis of a program which realization is left to the person who has custody of the assets, which will have to execute the transfer of these assets to the beneficiaries designated by the person upon the occurrence of certain conditions. A protector may be appointed, as in the trust, with the task of supervising the proper implementation of the program. According to an important interpretation, this instrument differs from the trust to the fact that the beneficiaries of the trust, although they are determined, would not have a right to the assets upon termination of the program, because the contract could provide for the right for the person who creates this contract

5 or the protector to modify the program or beneficiaries in this differing from the trust that often, instead, has restrictions in this regard. Also discussed is the asset segregation of the assets conferred in the contratto di affidamento fiduciario. In any case, it is obvious the difference compared to the trust, where segregation is a natural aim of the institute as acknowledged by the Hague Convention. To note, finally, that it is an atypical contract and, therefore, it is exposed to greater control by the judge. Andersen Tax & Legal Italia, former Noda Studio, professionals are at your disposal to provide our Clients with the advice on the issues highlighted in this Circular. The information contained in this document is for information purposes and does not refer to the particular situation of an individual or a legal person. They are not legal or fiscal advice. These content can not replace individual counseling by experts in specific concrete cases. No one should act on the basis of this information without adequate professional advice and without an in-depth examination of the situation. Andersen Tax & Legal does not take any responsibility for the decisions taken on the basis of the above information.