Research On The Right Reservation Of Family Trust Settlor In China

Originating as a usufruct system in the UK,the family trust has grown in the US and has since been replicated in civil law systems,with the family trust now becoming one of the most effective legal systems for passing on family assets to high net worth individuals internationally.A family trust cannot be set up without a settlor.It requires not only the settlor to provide the property to be held in trust,but also the settlor to design the terms of the trust and to express the purpose of the trust.This gives the trustee an ever-increasing role in the trust.The desire of family trustees to retain more rights to maintain oversight or even control over the trust can become a barrier to the trustee’s administration of the trust,a conflict with the interests of the beneficiaries and a fraud on creditors outside the trust,thereby creating an imbalance of interests between the parties to the trust.Therefore,the study of the retention of rights by the trustees of family trusts has become a must for the longevity of family trusts and the balance of interests between the parties.China’s Trust Law was enacted and implemented in 2001,which reserves too many rights for trustees of trusts and has a mandatory and stereotypical overtone,resulting in an unbalanced interest between the trustees and other trust parties.In addition,the principles of the reservation of rights of family trust trustees are not clear enough,and the legal coordination mechanism in case of conflict of rights is not sound enough.By studying and learning from the provisions on the rights of family trustees in the United States and the major civil law countries,comparing the current situation of China’s legal provisions,and taking into account the actual situation in China,this article summarises the responses to the above problems in China’s Trust Law,so as to correct the role of family trustees in China,resolve the conflicts of interests between the parties,and promote the trust industry in China to a higher level.This paper contains four sections excluding the introduction.In the first part,the concept of the trustee of a family trust is introduced.After the specific concept of the family trust and the trustee is clarified,the meaning of the reservation of rights is clarified,reflecting the uniqueness of the trustee in the trust;the evolution of the rights of the trustee can visually show the expanding rights and status of the trustee.The evolution of the principal’s rights is a visual representation of the expanding rights and status of the principal.The rationality and necessity of the principal’s rights reservation is then explained,as it is in line with the value and nature of the trust and the objective needs of the principal in China.In the second part,by analysing the current situation of statutory and intended rights of the trustees of family trusts in China,it is found that there are four main problems with the reservation of rights of the trustees of family trusts in China,namely,the existence of unclear principles for the reservation of rights,the excessive reservation of rights of the trustees,the inability to balance the interests of the parties and the inadequate legal coordination mechanism for the conflict of rights,which will point out the direction for the following road to improve the relevant legislation on family trusts.In the third part,we analyse the antecedent experience of the major common law countries where trusts originated and explore what can be learnt from the major civil law countries with similar trust development experience as ours,so as to provide sufficient theory and experience for the following refinement of the design of the reservation of rights of trustees of family trusts in China.In the fourth part,we design a path to optimise the retention of the rights of the trustees of family trusts in China.Firstly,the principles of principal’s rights reservation are clarified;secondly,the problem of excessive principal’s rights reservation is addressed by appropriately limiting the principal’s rights,reducing the statutory rights of the principal,setting the boundaries of the intended rights reservation,rectifying the status of the principal and increasing the role of the protector;thirdly,the problem of unbalanced interests between the parties is addressed by analysing the two aspects between the principal,the trustee and the beneficiaries respectively;finally,the mechanism of negotiation between the parties is increased to save judicial resources,improve the efficiency of the trust and reduce the conflicts between the parties.Finally,the mechanism of negotiation between the parties is added to save judicial resources,improve the efficiency of the trust and reduce conflicts between the parties to the trust through the consent of the parties.