Trust: Settlor, Trustee and Beneficiary in Asset Protection

In a trust, three roles divide the assets: the settlor places the assets, the trustee manages them with a fiduciary duty, and the beneficiary receives them. Under Law No. 14,754/2023 (Lei 14.754/2023), Brazil's Federal Revenue Service (Receita Federal) treats the assets as the settlor's until distribution or the settlor's death.

The trust organizes assets but does not set aside Brazilian rules on creditors.

This text focuses on who does what. For the step-by-step and the taxation in detail, see the guide to an offshore trust for Brazilians. To decide whether a trust is worth it, see offshore trust: is it worth it?.

Who are the settlor, the trustee and the beneficiary?

Art. 12 of Law 14,754/2023 defines the roles for tax purposes. Each has a distinct function and responsibility:

The law also defines two documents. The trust deed is the settlor's written act that governs the creation and operation of the trust, the trustee's conduct and the distribution rules. The letter of wishes is a supplementary act in which the settlor records what they expect the trustee to do.

In practice, almost everything that matters is in these two documents. The deed says who can change what.

Whose are the assets after the trust is created?

For Brazilian law, the assets remain the settlor's. Art. 10 establishes two rules:

1. •the assets and rights remain under the settlor's ownership after the trust is created;
2. •they pass to the beneficiary's ownership when the trust distributes them or when the settlor dies, whichever comes first.

Three consequences follow:

• •Income tax. Income and capital gains are considered the holder's and are subject to individual income tax (IRPF) under the rules that apply to the holder (art. 10, § 3).
• •Controlled companies. If the trust has a controlled company abroad, it is treated as held directly by the holder, and the controlled-company rules of Section III of the law apply (art. 10, § 4).
• •Transfer. The passage of the assets to the beneficiary is treated as a gratuitous transfer: a donation, if during life, or a transfer causa mortis, if resulting from the settlor's death (art. 10, § 2).

There is a relevant exception. If the settlor irrevocably gives up the right over a portion of the assets, the transfer of that portion to the beneficiary may be considered to have occurred earlier (art. 10, § 1). To see how this fits your case, consult a professional in succession planning.

What can the settlor control without undoing the trust?

Law 14,754/2023 does not set a limit on powers. What the settlor can do (revoke, replace the trustee, change beneficiaries, direct investments) is defined by the deed, governed by the trust's foreign law. Brazilian law only recognizes that both scenarios exist: trusts in which the settlor can still change the document and trusts in which the settlor has died or lost those powers (art. 10, § 7).

The more powers the settlor keeps, the more the trust looks like the settlor's own property. For Brazilian taxation this is already the rule, because the asset stays in the settlor's name anyway.

The protector, widely cited in trust structures, does not appear in Brazilian law. It exists only if the deed creates it. If your document provides for a protector, read carefully which powers it has over the trustee and the beneficiaries, and confirm with a lawyer in the trust's jurisdiction.

For a specific type of trust, see blind trust: what it is and whether it exists in Brazil.

What does the trustee need to provide to the Brazilian settlor?

The trustee is not the taxpayer, but Brazil needs its data. Art. 10 creates a chain of duty to provide information:

• •the settlor or the beneficiary must request from the trustee the financial resources and information needed to pay the tax and meet the other obligations in Brazil (§ 5);
• •the law determined that the deed or letter of wishes of existing trusts had to come to irrevocably and unalterably oblige the trustee to comply with the law, within 180 days counted from publication (§ 6);
• •if the settlor has already died or lost powers, and the beneficiaries also cannot change the document, the beneficiaries send the trustee formal notice of the obligation and request the resources and information (§ 7).

The most important point is in § 8: if the trustee does not comply with the request, this does not release the settlor or the beneficiary from meeting the principal and ancillary tax obligations. The trustee's lack of response is not a justification before the tax authority.

For this reason, when setting up a new trust, it is worth asking for the deed to already include the duty to provide this information. This is a practical recommendation, not a requirement of the text; validate it with your lawyer.

To organize filings and deadlines, see the compliance service.

Does the trust protect assets from the settlor's creditors?

Not automatically, and not against Brazilian fraud rules. Two rules explain the limit:

• •Fraud against creditors. The Civil Code (art. 158) lets unsecured creditors annul gratuitous transfers of assets made by a debtor who is already insolvent, or who becomes insolvent because of them, even if the debtor is unaware. If the transfer to the trust is treated as a gratuitous transfer, this rule may reach it. It is the judge who characterizes the act.
• •Fraud on enforcement. The Code of Civil Procedure (art. 792, IV) considers it fraud on enforcement to dispose of an asset when, at the time, a lawsuit capable of driving the debtor into insolvency was already pending against them. The act is ineffective against the enforcing party (art. 792, § 1).

Another point is inheritance. The Civil Code reserves half of the estate for forced heirs, the forced heirship share (art. 1,846), and declares a donation void to the extent it exceeds what the donor could dispose of by will (art. 549). Since Law 14,754/2023 treats the passage from the trust to the beneficiary as a donation or inheritance, it is worth checking with a lawyer whether the planned distribution respects these limits.

In short: a trust can be part of legitimate planning, done in advance and with no debts or lawsuits pending. Done in a hurry, with a creditor at the door, it can be challenged. The details are in offshore asset protection: what the law allows and in asset segregation with LLC, trust and holding company.

What should be declared in Brazil when there is a trust?

Art. 11 requires the holder to declare the trust's assets and rights directly, in the annual adjustment return (DAA), at acquisition cost, in relation to the base date of December 31, 2023. If the taxpayer had reported the trust itself on the DAA, § 1 requires replacing it with the underlying assets and rights, dividing the acquisition cost among them.

There is also the Brazilian Capital Abroad report (CBE). The Central Bank states that it is required of resident individuals and legal entities with assets abroad totaling US$ 1 million or more on December 31, to be filed between February 15 and April 5 of the following year. The penalty for not declaring ranges from BRL 2,500.00 to BRL 250,000.00. How a trust's assets enter that total is a question to be confirmed in the current BCB manual, not presumed.

If there is an LLC or another company inside the trust, more care is needed. See LLC inside a trust and the corporate structures service. For taxation and planning, consult the tax planning team.

What should you check before signing the trust deed?

Use this list of questions with your lawyer:

1. •Who is the trustee, is it an individual or a legal entity, and which law governs the trust?
2. •Does the deed oblige the trustee to provide information and resources to meet the obligations in Brazil (art. 10, § 5)?
3. •Which powers does the settlor keep: revoking, changing beneficiaries, replacing the trustee?
4. •Is there a protector? What can it do?
5. •Who are the beneficiaries, and when and how do they receive?
6. •Is the letter of wishes aligned with the deed?
7. •Are there debts, lawsuits or forced heirs who could challenge the transfer?
8. •Does the trust have controlled companies or accounts in other countries, and who declares what?