With more and more Foreigners owning property in Mexico, it is increasingly common to have the issue of Estate Planning or ownership of real estate require some involvement of Mexican law.The purpose of this memorandum is to provide a brief general analysis of the trust tool in Mexico, the different types of trusts, as well as several examples of their practical applications.

1. The Essential Transfer.By virtue of a trust, a person, named “fideicomitente” or “settlor,”
2. Trustee or Fiduciary, the bank that receive trust assts on behalf of the Beneficiary.
3. Trust Beneficiary, is the buyer .

 In order to form a Mexican trust, a settlor and trustee are required. 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:

1. a) The Settlor or (Fideicimitente) 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).
2. b) The Trustee or Fiduciary 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. Mexican law reserves this capacity exclusively to banking institutions, and in certain cases, to other financial institutions which are entitled to act as trustee or Fiduciary under Mexican law.
3. 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 and except for the guarantee trusts, the trustee may never act simultaneously as beneficiary and trustee.
4. 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.

Trust Law In General in Mexico:

There are certain types of trusts expressly forbidden by law, such as:

• (a) secret trusts;
• (b) trusts which benefit different persons successively which must be substituted by the death of the previous person, except when such trust is made in favor of people living or conceived at the time of death of the settlor; and
• (c) except in certain cases, the trusts with a duration of more than fifty years.

A trust is extinguished upon the occurrence of any of the following events:

• (a) the fulfillment of its purpose;
• (b) when it has become impossible for the trust to achieve its purpose;
• (c) when it has become impossible for the trust to fulfill the condition precedent to which its effective term is subject;
• (d) upon the fulfillment of the condition subsequent to which it was subject to;
• (e) upon the express agreement among the settlor, the trustee and the beneficiary;
• (f) upon its revocation by the settlor, as long as it reserves itself such right at the time of formation of the trust; and
• (g) when it has been determined that it was formed fraudulently against the interests of third parties.

Nature of the Trust Estate

Neither the trustee nor the settlor may individually perform acts of ownership with respect to the trust assets, being able to act only within the limits which have been set forth in the corresponding trust agreement. Contrary to the civil property concept in which a party has the right to freely enjoy and dispose of its assets, under the trust entitlement such right does not exist since the parties may not dispose of the possession and the assets to their benefit.

Types of Trusts

Mexican law does not limit the types of trusts which may exist, given that each of them may have distinct and specific characteristics. For purposes of this article, described below are the four most commonly used types of trusts:

• a) A Guarantee Trust is formed for purposes of guaranteeing the fulfillment of a payment obligation in favor of the beneficiary or beneficiaries. The same guarantee trust may be used to simultaneously or successively guarantee obligations of the settlor with different creditors. Only in this type of trust may the trustee simultaneously act as trustee and beneficiary, as long as the purpose of such trust is to guarantee obligations in its favor.

The contribution of real estate to a guarantee trust must be evidenced in a public deed. When referring to personal property, the trust agreement may set forth certain rights for the settlor with respect to its use and the use of its products. In any event, the person having the physical possession of the assets will be responsible for the loss, damage or detriment of the trust assets.

• b) In a Management Trust, certain goods are contributed to the trust with the purpose of being managed by the trustee. Among this type of trusts are the trusts for resource management, for representation, for social assistance or welfare, or the most common of them, the trust for testamentary purposes.

• c) In an Investment Trust certain assets are contributed to the trust for their investment. In this type of trusts generally the settlor and beneficiary is the same person, although in some cases (for example, the trust of retirement plans or savings) in which the settlor and beneficiary are different persons.

• d) A Public Trust is a trust formed by a branch of government or one of its entities for purposes of promoting areas for development, and having an organizational structure similar to that of other government entities. This type of trust generally is formed for specific developments and projects, or for the development of certain activities. These trusts are not subject to the maximum duration of fifty years set forth by law.