Home / Publications / The Civil Trust

The Civil Trust

Over the past few years, the civil trust has reappeared strongly, and its use is becoming increasingly frequent in legal relations, due to the economic and agile benefits that permeate this figure. The fact that simply by the occurrence of a condition imposed by the constituent, the beneficiary acquires the trust property, makes the property transfer easy and practical.

For anyone who wishes to set forth this type of trust, shall be enough to go to the closest notary and submit a will declaration to a public deed. Likewise, once the condition occurs, the beneficiary must go before the same entity to exercise his right, and to achieve the effective trust property transfer in a fast way and without great obstacles.

However, low costs and agility in the constitution are not the only virtues of this legal figure enshrined in national legislation. The assets unseizability stated in article 1677, paragraph 8 of the Civil Code, makes this figure even more attractive to businessmen.

This special protection over trust assets has as an effect that they cannot be considered as a general pledge of the creditors neither the trustor nor the trustee. In this regard, jurisprudence tended to accept that all trust property, under a civil trust, was unseizable.

Nevertheless, in latest decisions of the Supreme Court of Justice, the magistrates have adopted a different position, since they have admitted the seizure of theses trust assets.

Through a collection action, a Bank requested the seizure of assets that were in a civil trust. The defendants of this action declared that these assets could not be seized since were covered by the protection of unseizability. The judges ruled in favor of the financial entity arguing that these assets were unseizable.

The Supreme Court of Justice, through a judgement of December 18, 2019, confirmed the judges’ sentence. The main argument of the Court, and very critical in our opinion, is that in this case, both, the constituent and the trustee held the same quality. In this event, these assets integrate the assets of the constituent not on a "fiduciary basis" but by virtue of a title and/or antecedent mode (for example, a Purchase Agreement, or the acquisitive prescription, legal prescription preceded by an adverse possession).

It means that in the event in which constituent and fiduciary have the same quality, the trustor creditors may seize the assets found in the civil trust because the property remains on the constituent.

This rule, in our opinion, not only sets a new jurisprudential precedent, but protects the creditors from fraudulent debtors, who, through the use of a civil trust, would seek to avoid seizures but without transferring the property to a trustee.

Authors

Carolina Arenas
Carolina Arenas
Partner
Bogotá
Diana Moreno
Diana Moreno
Associate
Bogotá