A common problem many foreigners face relocating to Dumaguete is the rule that a non-Philippine citizens cannot own real property in the Philippines, subject to several exceptions, such as owning a condo.
The general rule prohibiting non-citizens from owning real property has made it difficult for non-citizens retiring in the Philippines. Having to title property in the name of some else has lead to many problems for foreigners desiring to acquire real property in the Philippines. In some cases, this has resulted in their lost of their investment in the real property.
Some of the options available for non-citizens to acquire real property is to buy the property in the name of their Filipino wife or girlfriend, leases the property, form a corporation or partnership to own the property, or create a trust to acquire the property. Of all the options available, in most situations a trust is the best option for many reasons. Unfortunately, trusts are seldom used due to the misconception that a trust cannot own real estate in the Philippines.
The term “trust” refers to a document created by a will or by an inter- vivos declaration to create a trust while living. When a trust is created, the trustee takes title to property transferred to the trust for the purpose of protecting, conserving or managing it for the trust beneficiaries. The beneficiaries of a trust usually do no more than accept the trust benefits. The trustee and beneficiary of a trust may be the same person who creates the trust. In other words, you can create a trust and name yourself as the trustee and beneficiary. However, it is generally better to use an independent trustee.
One of the many reasons’ trusts is not used to acquire real property in the Philippines is the misconception that under the Philippine Constitution a trust cannot own real property. (There is no rule that a trust can not non real estate assets, such as stock).
However, on closer reading of the Constitution, one will find that a properly drafted trust is not prohibited from holding real property in the Philippines. Thus, If you follow Philippine Law, a trust can own real property and other personal assets..
This is a point most Philippine lawyers will disagree with. However, of all the lawyers and people that have told me that a trust can’t own real property in the Philippines, not one has been able to show me under Philippine Law, a provision in the law that clearly states that a trust under Philippine Law cannot own real property. If anyone reading this knows of a rule that holds otherwise, kindly give me a copy.
Keep in mind that although trust acquiring real estate in the Philippines has been the main has been a topic of this discussion, trust can hold almost any asset you can hold in your name, such as stock, mutual funds, bonds, personal property, etc. Also the Philippine law applicable to owning real estate in the Philippines is not applicable to a trust owning property in the US, Canada, Germany, etc. As a result if you own real property in the U.S., Canada and the Philippines, all these properties can be held by the same trust and not subject probate. In addition to the benefit of asset protection and management – a win-win situation.
If you are thinking about buying real property in the Philippines, or just doing estate planning, don’t forget to take a look at using a trust to achieve your goals. Besides being able to acquire real property in the Philippines through a trust, some of the other virtues of a trust are: avoidance of probate, avoidance of the Philippine Force Heirship Rules, asset management in the event of incapacity, and asset protection. A trust can be a multifaceted vehicle for estate planning and management of assets during life and after your death. After your death it can be an assets protection tool to protect your heirs to insure your assets are beginning used for their benefit not someone else’s benefit.
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