In Hungary, trustees are individuals or organizations that manage another person’s money or property for the benefit of beneficiaries. Trustees manage assets while planning for the future. They also support charitable causes in some instances.

Trusteeship in Hungary is often associated with civil law. Specific regulations govern duties and liabilities. Hungary adopted the legal institution of trusts in 2024, modifying the Civil Code.

Role and Responsibilities of Trustees

Under Hungarian law, residents can set up a trust in the country. Trusts are legal agreements that outline how each resident’s assets should be managed or distributed. Residents appoint trustees to oversee the trust and ensure all terms and conditions are followed.

This means trustees must honor their fiduciary duty to act in the best interests of beneficiaries.

They must:

• Stay honest and fair while avoiding conflicts of interest.

• Manage all assets with care (assets usually mean money and property).

• Follow all the rules and instructions set aside in the trust agreement.

Trustee Powers

Trustees have several powers in addition to responsibilities. They can buy, sell, or invest assets on behalf of the trust and distribute income and assets to beneficiaries.

However, they must maintain accurate records of all activity related to the trust, especially if they delegate some duties to others. Trustees must also comply with specific provisions of the above-mentioned Civil Code.

Legal Implications After Breach of Duty

Trustees may be held legally liable if they breach their fiduciary duties. This liability may extend to the trustee and the entity they represent. Grounds for liability include:

• Breach of trust. A trustee may fail to fulfill their obligations or act contrary to the trust and beneficiary’s interests.

• Negligence. If a trustee acts or omits information that results in financial losses, they may be liable for negligence.

• Misappropriation of assets. If a trustee uses trust assets for their own benefit, they may face criminal charges.

Trustees should consult with legal professionals before taking on any trustee duties. This will help them understand their obligations and avoid legal pitfalls.

Accurate and detailed records can also help them if they are accused of something they did not do.

Moreover, if trustees always act in the best interests of beneficiaries, the chances are slim that something would happen that makes them liable for damages or negligence.

The Future of Trusts in Hungary

As of September 2023, the transfer of assets became taxable. This process was previously exempt from tax and duty. This means trust agreements allow trustors to determine the existing market value of transferable assets. The transfer and placement of assets is now seen as a sale, hence the tax change.

Sources

https://www.rsm.hu/en/blog/fiduciary-trusts-2024

https://journal.step.org/tqr-march-2018/hungarian-trust

https://alianthungary.com/en/trust-in-the-hungarian-law/

https://www.thelegacylawyers.com/blog/common-reasons-trustees-get-sued/

https://cms-lawnow.com/en/ealerts/2013/09/hungary-trust-law-to-be-introduced

https://airon.hu/rules-on-the-activities-of-trustees-the-trust-legislation-of-hungary/