Trust

THE "TRUST" AN INSTRUMENT FOR FOREIGN INVESTMENT IN MÉXICO

LEGAL FRAMEWORK:
Mexican Laws allow foreigners to acquire the rights to use properties located on the coast and border areas of the country through a TRUST, the only legal instrument that guarantees foreigners the ownership rights, whether residential, commercial or tourist This juridical instrument grants the same rights and duties regarding ownership of a real property acquired by a Mexican national through a sale-purchase.

INSTITUTIONS OPERATING AND FORMALIZING TRUSTS IN MEXICO:
In Mexico, banks are the only entities authorized to manage Trusts.

The trust contract must always be executed before a Notary Public. Once the trust contract is executed, it will serve as ownership title to the property.

WHAT FEATURES SHOULD A TRUST HAVE?
In the trust, the current owner of a property, that is, the seller is identified as the (Trustor) and this person conveys or affects ownership of the property to the bank, referred to as the (Fiduciary). The latter in turn grants the buyer, who is referred to as the (Beneficiary), the ownership of same during the term agreed, which is generally a period of 50 years, renewable. The buyer, in this case you, shall be the beneficiary in the Trust and you have the absolute use of the ownership over the property in question.

WHAT IS REQUIRED TO OPEN A FIDUCIAL ACCOUNT?
You, or the person selling the property, must provide the bank the following documents:
1.-Copy of the property title indicating the exact area, characteristics and boundaries of the property and a certificate of no-debt of federal or municipal taxes. (These documents must be presented by the seller)
2.-Your name, nationality, occupation, address and telephone number proven with a copy of your passport, immigration document (if applicable), telephone bill or any other bill which has the address of your home printed on it.
3.- The name(s), nationality, address(es) and telephone number(s) of the Trust beneficiary(ies) in case of death of the Beneficiary during the term of the Trust.
4.-The agreed price for the property.

TRUST CONSTITUTION PROCESS:
At the time of receiving the information and documents, the bank files the Trust application before the Secretariat of Foreign Affairs. This Mexican entity is the one responsible to authorize and preserve legality in the sales of property to foreigners through Trusts, among other things. When the bank gets the permit, it proceeds to legalize the ownership rights before a Notary Public. In Mexico, Notaries Public are lawyers, duly authorized by the government to formalize transactions. They keep a book wherein they record all events of property title transfer. The document delivered by the Notary Public is recorded at the "Public Registry of the Property and Commerce", evidencing in this way the name of the new owner who now has the rights over the property.

WHAT ARE THE RIGHTS AND DUTIES ACQUIRED BY THE TRUST BENEFICIARY?
As Beneficiary you have the rights of possession over the property: you may live at the property, remodel it, lease it, build on it, mortgage and, sell it or assign the rights to another person or entity. If you sell the property to another foreigner, all you have to do is appoint him/her as the new beneficiary in the Trust. Any amendments made to the original Trust must be recorded before a Notary Public, and the Bank which opened the account must also be informed. Remember that the sale and purchase of property rights brings forth a tax payment in Mexico which is calculated in reference to the value of the property. The obligation you have upon acquiring property in Mexico, is to pay the annual federal tax (Realty), that is charged to all real properties in Mexico, to pay your utility bills, maintenance fees (if applicable to the property) and also the annual Trust management fees. All these expenses are really cheap in Mexico compared to other countries.

WHAT HAPPENS IF THE BENEFICIARY DIES DURING THE TERM OF THE TRUST?
The trust beneficiary has a right to appoint an alternate as beneficiary in the Trust, the same who will have all the rights and duties over the property in case the original beneficiary died within the term of the Trust. With this appointment, his/her heirs shall not require to follow any legal proceedings. All they have to do is take the death certificate to the bank along with your identification documents so the bank may immediately register the new beneficiaries at no cost.

HOW LONG IS THE TERM OF A TRUST?
The original term of the trust is 50 years renewable in 50-year periods. That is, you acquire a Trust and, at the time of lapsing, you may renew it for another 50 years, indefinitely. Renewal must be filed between 360 days prior to, and 180 days after the lapsing date of same. The Secretariat of Foreign Affairs must again grant the trust permit to be valid for another 50 years

CAN I SELL OR ASSIGN THE TRUST?
A Trust is assigned almost like any other property title at the time of sale. The Secretariat of Foreign Affairs issues the permit for the new Trust in case the property is sold to a foreigner. In case the property is sold to a Mexican national, the process is simpler and the Trust is then canceled and the Notary Public issues a property title, specifying that the vendor is the beneficiary in the Trust.

ARE MEXICAN BANKS THE ONLY INSTITUTIONS THAT CONTROL AND MANAGE TRUSTS FOR THE FOREIGN INVESTORS?
Yes, but you have the right to choose the bank with which you would like to open the fiducial account. This Trust is not a bank instrument, rather it is a mechanism to allow foreign investors to participate in the benefit, not only of the sale-purchase of property, but also in other sectors of the economy, like purchasing shares in corporations, etc.