The operation of trust under Greek law
Since Article 1923(1) of the Hellenic Civil Code states that the testator may oblige the heir to surrender the inheritance acquired or a percentage thereof to another (the beneficiary under trust) after a specific event or a specific point in time. As is clear from this provision, in addition to making a person his direct heir who immediately acquires the inheritance after his death, the testator can also designate an indirect general successor, the beneficiary under trust, who is heir subject to a deadline/condition precedent, which is met after the death of the testator, which corresponds to a deadline/condition subsequent for installing the initial direct heir. In order to establish the trust, as is clear from the said provision, it is not necessary to use standard phrases, nor even the word ‘trust’. That can be done by the testator making an indirect declaration, provided that the will shows the intention of the testator for someone to become his heir, only for a specific time period and then for another person to become his heir. That intention of the testator may also be expressed in the form of an obligation which requires the encumbered heir to bestow the inheritance or a percentage thereof on another (the beneficiary under trust) provided it is clear that the testator wanted the latter as his general successor, on whom the inheritance will be automatically bestowed at a specific point in time or following an event specified by the testator. Moreover, the content of the will must show the person who is the beneficiary under trust, who may be any person capable of becoming a beneficiary under trust, who at the discretion of the testator is designated as the beneficiary under trust. Moreover, the provisions of Articles 1924 to 1928 of the Hellenic Civil Code establish interpretative rules under which in the case of doubt the persons specified therein are deemed to be beneficiaries under trust. However, the cases cited in these provisions are indicative only. That is why it is a matter of interpreting the will in each case, to determine from the way in which the last will was worded, whether there is a general trust contained within it and who the beneficiary under trust is. Besides, as is clear from a combined reading of the provisions of Articles 173 and 1781 of the Hellenic Civil Code, in order to interpret the will, the true intention of the testator must be sought, without sticking to the literal meaning of the words, such intention being viewed in the subjective sense, not in the objective sense in which the third parties would perceive it, in accordance with transactional good faith. These interpretative rules apply when, in the view of the court, the content of the will does not show the intention of testator either because it was not clearly expressed, creating a corresponding doubt, or because it was expressed incompletely, thereby presenting a corresponding void, so in order to find the testator’s true intention the court can use even evidence from texts other than the will itself. The ruling of the court trying the merits that the provision of the will is clear or on the contrary that it is vague and needs to be interpreted, which requires an assessment of the content of the will, is an assessment of the facts and consequently is not subject to review by the Hellenic Supreme Court (Article 56(1) of the Hellenic Code of Civil Procedure). Article 1935(1) of the Hellenic Civil Code states that devolution if the inheritance to the beneficiary under trust occurs once the heir dies, if the testator did not specify any other event or point in time. It is clear from these provisions that from the moment the inheritance is made to the heir, in other words from the death of the testator, the beneficiary under trust acquires a right of expectation, under a condition precedent, that the inheritance will devolve to him, which could be the subject of a declaratory action under Article 70 of the Hellenic Code of Civil Procedure, if the existence of that inheritance is contested by the trustee (Hellenic Supreme Court Judgment No. 617/86 Nomiko Vima Law Review 35.540). Lastly, it is clear from the provisions of Article 1937(2) of the Hellenic Civil Code that in the case of inheritances which are subject to a trust, the trustee is not entitled to dispose of the estate for such time as the trust is ‘in existence’, and in particular until the inheritance devolves to the beneficiary under trust under the relevant provisions of the will, unless that is required by the rules of ordinary management of the estate (see Hellenic Supreme Court Judgment No. 931/2005 EEN Law Review 2006.2641, in the sense that under the provisions of Article 818 of the Hellenic Code of Civil Procedure and Article 1937(2) of the Hellenic Civil Code, the relevant decision lies with the court which the trustee is obliged to seek recourse to. In light of the purpose of the provisions of Article 1923(1) of the Hellenic Civil Code, the power to dispose of the inheritable estate is limited by law, but such disposal is permitted in the case of the provisions of Article 1930 of the Hellenic Civil Code on restitution of the residuary legacy. Consequently, in the case of beneficiary under trust who takes up the residuary estate (a “fidei commissum de eo quod supererit”) at the time of the devolution to him (namely from the time the heir died) or in the case where the testator allowed the heir to freely manage the estate, the trustee is entitled to freely dispose of the inheritable assets, in which case the beneficiary under trust will receive from the estate anything left of the estate following management thereof by the heir [see Apostolos Georgiadis, Michalis P. Stathopoulos, Civil Code, Article-by-Article interpretation, Vol. X. Inheritance Law, Article 1937, p. 397 para. 1].
- The tax burden in the case of a trust can be summarized as follows (Article 17 of Legislative Decree 118/1973):
- The heir who is trustee has a tax liability from inheriting the inheritance as usufructuary of the estates covered by the trust.
- The beneficiary under trust has a tax liability from devolution of the trust as owner of the assets devolving to him.
- The provisions of Article 1939 of the Hellenic Civil Code provide for the case of a residuary legacy.
The conditions for the existence of such a type of trust include: a) the beneficiary under trust receives anything found in the estate at the time of devolution of the estate to him and b) the heir is granted a right to freely manage the assets. A consequence of that freedom of the trustee is the right to dispose of inherited assets without discrimination as to the grounds for doing so, even by means of gratis acts. However, in transactions entered into relating to the trustee’s right to dispose of assets, there is no need to include the provision of the last will and testament because the law considers such disposal to be an act of management of the assets. (see Vathrakokilis, Interpretation of the Hellenic Civil Code, 1939, p. 2417, Papachristou, Inheritance Law 1983, p. 442 and Balis, Inheritance Law, 1961 para. 291 p. 493, Hellenic Supreme Court Judgment No. 595/1952, ThXD Law Review 61, Athens Court of Appeal Judgment No. 45/57 Nomiko Vima Law Review 5.184, Athens Court of Appeal Judgment No. 3096/1951 ArxN Law Review III.191, Athens Court of Appeal Judgment No. 3274/1985, Hellenic Supreme Court Judgment No. 1747/1990, D/NH Law Review 1992.540, Athens Court of Appeal Judgment No. 2210/2004, among others).
The testator may include a provision in his last will binding the trustee to hand over the inheritance acquired or a percentage thereof to another (the beneficiary under trust) after a specific event or point in time, without that form of the inheritance losing, in accordance with the provisions of Article 1939 of the Hellenic Civil Code, its character, when the testator permits free management of the assets by the heir or the beneficiary of the estate receives whatever if left of the estate at the time of its devolution to him (residuary trust). See Hellenic Supreme Court Judgment No. 681/1996 Dikeosini Law Review 1998.1585; EEN Law Review 1998/45)”. Moreover, as the case law has ruled: “The trustee is a true and perfect heir, and the beneficiary in trust is the direct general successor of the same testator but subject to a condition precedent (Georgios Balis Inheritance Law, para. 284, 285, 291)” (see Athens Court of Appeal Judgment No. 3142/2003, Dikeosini Law Review 2004, 1485).
Assume that there is the testator D, a trustee A and the person in whose favor a residuary trust has been established, B. Where the D (a) makes A his general trustee and (b) established a residuary legacy in his will (Article 1939 of the Hellenic Civil Code) in favor of B, the trustee A is entitled to dispose of the assets he inherits in any manner even by means of gratis acts (such as deeds of sale or donation, etc.) but the ability to dispose of the assets inherited from the testator via a final testamentary disposition is precluded (i.e. he cannot dispose of the inherited assets via a will). (see. Hellenic Supreme Court Judgment No. 1451/1998, Elliniki Dikeosini Law Review 1999, p. 799, Hellenic Supreme Court Judgment No. 1747/1990, Elliniki Dikeosini Law Review 1992.540, Athens Court of Appeal Judgment No. 2210/2004, Elliniki Dikeosini Law Review 2006.265)”.
It is worth noting that if there is a will made by the trustee who wishes to dispose of the inherited assets to another person (of his own choosing) it is null and void vis-à-vis the beneficiary under trust and does not generate any legal consequences whatsoever in relation to the devolution of inheritance rights, which are left at the time of the trustee’s death which pass de jure (mandatorily) only to the person in whose favor the residuary legacy was established.
In a series of judgments (Piraeus Multi-Member Court of First Instance Judgment No. 982/2008, Piraeus Court of Appeal Judgment No. __, Hellenic Supreme Court Judgments No. 1158/2013, 1159/2013 and most recently 2012/2017) (in which the author appeared and successfully represented the defendant association in whose favor a residuary legacy had been established) the courts have ruled, inter alia, that: “… Where there is a trustee for which there is a residuary legacy, even when the testator expressly permits the unrestricted and unlimited management of the estate by the trustee in his will, the trustee shall not be entitled to dispose of the inheritable items by a disposition in his own last will and testament…”.
* The information is accurate to the best of our knowledge as at the time of writing. We have no obligation to update it. We accept no responsibility against any third party who is not a client of the firm and has not signed the terms of our engagement.