Civil Trust In Colombia: What Is It For And Why Do It?

The Growing Use of Civil Trusts in Colombia

In the past few years, the constitution and use of civil trusts have been growing widely in Colombia for different purposes. In particular, some of our foreign clients have found legal protection in this figure for their properties in Colombia. Below, we will explain a little bit of what they are and what they are used for.

What is a Civil Trust?

A civil trust is a civil contract in which a property is pledged in order to be transferred to a third party, once an expressly fixed condition is fulfilled.

For example, person A will give a house to person B if and only if person B gets married. While the condition is fulfilled the house will be managed by person A or by person C. As stated in the past example, there are three parties which are called the grantor of the trust or trustor, the trustee, and the beneficiaries.

Key Roles in a Civil Trust

  • Grantor or Trustor: The person who creates the trust, the owner of the property that will be transferred in case the condition is fulfilled.
  • Trustee: The person in charge of managing the trust and doing the transfer of the assets once the condition is fulfilled.
  • Beneficiary: The ones that receive the assets of the trust when the condition is fulfilled.

It is important to clarify that the grantor and the trustee may be the same person. In Colombia, for example, if no trustee is expressly appointed, it is presumed that the grantor will take on this role. Additionally, the civil trust in Colombia allows the designation of one or several beneficiaries. These are substitute beneficiaries in case that the condition is not fulfilled by the main beneficiaries.

What is a Civil Trust for in Colombia?

First of all, it is a way to protect a person’s assets. This is because once a set of assets enters into a trust, in principle, these assets are unattachable and therefore, are legally protected in case the person’s assets are pursued and affected for the payment of a debt. However, this rule of unattachability in Colombia was modified recently. In the cases in which the trustor and the trustee are the same person, the assets of the trust are seizable and are part of the trustor’s capital. For the rule of unattachability to operate in this case, the trustor and the trustee must be different people. Another important benefit and the reason why most of our clients come to us looking for a civil trust is that the constitution of trusts in Colombia serves as a way of estate planning even after death. In Colombia, in inheritance matters, there are forced allocations. That is, legally established ways of distributing the assets of an inheritance that must be followed. The constitution of trusts allows planning in advance in a more focused manner how the distribution of an inheritance will be made in case a person dies.

Need Assistance?

In case you have any doubts on the subject or need assistance in related matters, please do not hesitate to contact us through our web page and our phone numbers.