About fiduciary asset management in general

The fiduciary asset management system offers a unique solution for asset protection, generational transition and family inheritance planning, as well as cross-border investment management. It can be an ideal solution for investors and families who want to secure, preserve and pass on their assets.

Why and in what situations is it worthwhile to place assets in fiduciary asset management?

Assets placed in trust are separated from the personal and business assets of the settlor and the trustee, thereby providing protection against creditors and external claims. Furthermore, the assets are protected even in the event of an illness that restricts the settlor’s ability to act.

In contrast to the strict and fixed rules governing wills and statutory inheritance, a fiduciary asset management agreement allows the settlor to freely decide on the beneficiaries, their shares, and the conditions and timing under which they may acquire the assets. Assets placed under fiduciary management are not affected by probate proceedings. Thus, for example, in the case of membership interests in a company, the management and protection of the assets can remain continuous.

If we have peaked your interest in fiduciary asset management, or if you would like to explore how this structure can serve your family or business goals, please get in touch with the team of the LeitnerLeitner’s Private Clients Division.

What are the advantages of fiduciary asset management in Hungary?

One of the main advantages of the Hungarian regulatory framework is that it does not contain citizenship or residency restrictions with regard to the settlor, the trustee, or the beneficiaries.
This structure, which is also open to foreigners, therefore provides flexibility in cross-border wealth planning and enables investors to manage their assets from Hungary under favorable conditions even if they live abroad.

A wide variety of foreign or domestic assets may be placed under fiduciary asset management — for example real estate, movable property (vehicles, works of art, collections), securities (shares, bonds, investment units), business shares, intellectual property, and claims.

How is fiduciary asset management established and how does it work?

Fiduciary asset management is a contractual legal relationship that was introduced in Hungary in 2014. The legal institution of fiduciary asset management is most comparable to the structure of Anglo-American trusts and is available not only to domestic but also to foreign investors under favorable legal conditions.

The owner of the assets, the settlor, transfers ownership of the entire assets or certain assets to the trustee, who

• exercises the rights of ownership,
• manages the assets,
• performs the related administration, accounting, and representation,
• preserves and increases the assets in the interests of the beneficiaries,
• distributes the assets to the beneficiary or group of beneficiaries specified by the settlor, and
• acts with discretion and confidential manner in the management of the assets.

There are three parties involved in fiduciary asset management:

Settlor: The person who establishes the fiduciary asset management relationship, under which they transfer ownership of certain assets to the asset manager. The settlor specifies in the trust agreement how the transferred assets are to be managed, who the beneficiaries are, and under what conditions payments are to be made to them.

Trustee: The natural person or company designated by the settlor, who bears full legal responsibility for managing and investing the transferred assets, as well as for fulfilling the tax and administrative obligations related to the assets. A distinction is made between commercial and non-commercial trust management.

Beneficiary: The person or organization entitled to receive distributions from the managed assets under the conditions specified by the settlor. Beneficiaries can be individuals, family members, charitable organizations, other legal entities, or even the settlor themselves.

Private Clients Division in Focus

Trust asset management glossary

Trust Management (trust-like structure)

A contractual relationship in which the settlor transfers ownership of certain assets to a trustee, who manages, protects, and grows these assets in the interest of the beneficiaries.

Settlor

The person or organization who establishes the fiduciary asset management relationship and transfers the assets to be managed to the trustee. They define the terms of the asset management and designate the beneficiaries.

Trustee

The natural person or company designated by the settlor, who manages the transferred assets with full responsibility. Their duties include preserving, increasing, administering, and representing the assets.

Beneficiary

A person or organization entitled to receive benefits from the managed assets under the conditions set by the settlor. This may be a family member, a private individual, a legal entity, a charitable organization, or even the settlor himself.

Assets (managed assets)

The totality of assets transferred into a trust, which can include real estate, personal property, securities, company shares, intellectual property, claims, etc.

Ownership rights

The rights granted to the trustee that enable the use, exploitation, enhancement, and management of the assets – for the benefit of the beneficiaries.

Trust agreement

A written document establishing the Trust, which includes the settlor’s provisions, the scope of beneficiaries, the conditions for payments, and the duties of the trustee.

Commercial fiduciary asset management

A structure in which the trust is managed professionally by a licensed trustee (typically a business entity). It is a regulated and supervised activity.

Non-commercial fiduciary asset management

Private asset management, carried out by a natural person or entity designated by the settlor, not as a commercial activity.

Asset protection

Placing the assets into a structure that separates them from the private and business assets of the settlor and the trustee, thereby providing protection against creditor claims, litigation, and other risks.

Succession / estate planning

A pre-planned method for transferring assets across multiple generations, allowing for flexible determination of the scope of beneficiaries, their shares, and the conditions for asset distribution.

Circle of beneficiaries

The group of individuals or organizations who may receive benefits from the assets.

Probate proceedings

The official process of testamentary or statutory inheritance. Assets transferred into a trust are not part of the estate, and therefore the process is not affected.

Discretion

It is the trustee’s duty to manage the entrusted assets confidentially and to act independently in accordance with the settlor’s provisions.

Intellectual property

Non-physical assets, such as trademarks, patents, copyrighted works, and know-how, which may also be placed into a trust.

Claim

A financial right of the settlor (e.g., related to a loan or contract) that may be transferred to the trustee.