TRUST X REAL ESTATE

99.9% of the time, real estate in the Philippines is titled under individuals or corporations. But there’s another legal vehicle worth considering: a “Trust.”

What’s a Trust?

A trust is a legal arrangement that separates legal ownership from beneficial ownership. It’s a tool to control how and when assets are distributed to beneficiaries.

For instance, corporate retirement funds are typically placed under a trust. Why? To protect them from being misused by company insiders. The trustee legally owns and manages the funds, but the real benefit goes to the employees upon retirement.

A more pop-culture example: NBA star Allen Iverson. When he signed his deal with Reebok, the brand placed a $32 million payout in a trust fund—only to be released to Iverson when he turned 55. This structure protected the money from being prematurely spent, especially considering the number of pro athletes who go broke after their careers.

In both cases, the trustor (the company or Reebok) hands over control to a trustee, who holds legal title and manages the assets. The beneficiary (the retiree or Iverson) eventually receives the benefits, as defined in the trust agreement.

So, what’s the connection to Philippine real estate?

It used to be common practice to title properties under a corporation for estate planning purposes. That strategy worked—until the BIR stepped in. Properties held by corporations are now subject to VAT on eventual sale, making them "ordinary assets."

Trusts, however, follow a different tax treatment. Real estate held under a trust structure may avoid being classified as ordinary assets, potentially offering a more efficient estate planning route.

Can you really put PH real estate in a trust?

Yes. I’ve seen it done—properties formally lodged under trust arrangements.

So why aren’t more people doing this?

Because trust companies (TCs)—regulated by the Bangko Sentral ng Pilipinas (BSP)—are cautious. Managing real estate through a trust involves regulatory complexity and low profitability. TCs typically charge an annual fee of around 0.25% to 0.75% of the asset’s value. This model only becomes worthwhile for them if the properties are high-value.

Why could this be the next big thing?

Given the rising value of real estate and the evolving tax landscape, trusts could become a go-to vehicle for savvy property owners. Medium-sized TCs might soon see an opportunity here—if they can hurdle the capital and compliance requirements set by the BSP and SEC.