Changes in Hungarian trust rules: assets shall be included in the forced heirship
It is essential to clarify regarding the trust, whether the assets entrusted to a trustee under trust, after the settlor’s death, can be added to the basis of forced heirship.
By introducing the trust into the Hungarian legal system in March 2014, high-quality and flexible regulation were in force in recent years. Given that the trust cannot serve to circumvent the mandatory rules of the law of inheritance, the modification of the Hungarian Civil Code was necessary. Accordingly, with the amendment of the regulations of the inheritance law it was entered into force on 23 June 2017 that the value of assets entrusted to a trustee under trust by the testator must be added to the basis of the forced heirship [Section 7:80 of the Civil Code].
The amended provision clearly states that the basis of a forced heirship is the net value of an estate, and the net value, at the time of advancement, of the advancement granted by the testator inter vivos, including the value of assets entrusted to a trustee under trust. This means that the asset given by the settlor must be considered as free donation, regardless of whether the trust is remunerated or not. Consequently, the Section (1) a) of Article 7:81 § of the Hungarian Civil Code is also expanded to the asset under the trust, and therefore, the values of assets granted by the testator to anybody more than ten years prior to his/her death shall not include to the basis of a forced heirship. In this regard, only the value of asset that was granted under the trust by the settlor not longer than ten years prior to his/her death shall be added to the basis of the forced heirship.
The modification also made it clear that the forced heir is entitled to pursue the claim against the trustee, as the owner of the asset and not against the beneficiary.
A further question arises whether based on contractual law or inheritance law shall then have a claim against the trustee if the beneficiary is also the forced heir? The Civil Code does not give a clear answer to this question, it only stipulates that the beneficiary entitlements shall cease, if the beneficiary satisfies a claim from the trust fund under a title not provided for in the contract.
In conclusion, it shall be stated that the trust is only suitable to “circumvent” the forced heirship, if the settlor grants the asset earlier than ten years prior to his / her death. In case the beneficiary and the forced heir is the same person, then based on the provisions of the contract, the settlor may decide if the beneficiary who enforces more claims is expelled or not.
Additionally, it is to be emphasized that the amendments presented above do not affect the general rule that the assets under the trust do not form a part of the estate.