I. Overview

The Philippines does not have a single, comprehensive “Trusts Act.” Instead, the law on trusts is scattered across:

The Civil Code (notably provisions on express and implied trusts)
The New Civil Code provisions on succession and wills (for testamentary trusts)
Special laws and regulations (banking, pre-need, retirement funds, REITs, etc.)
Judicial decisions applying general principles of the common law of trusts

This article explains, in Philippine context:

What a trust is
The requirements for valid creation of different types of trusts
Formalities (especially for land)
Special regimes (bank, business, charitable trusts)
The role of implied/resulting/constructive trusts
Practical steps and common pitfalls

It is for general information only and is not a substitute for legal advice on a specific case.

II. Basic Concept and Classification of Trusts

1. What is a trust?

In Philippine civil law and jurisprudence, a trust is a legal relationship where:

A person (the trustor or settlor)
Transfers property (the trust res or trust property)
To another (the trustee)
To hold and manage it for the benefit of someone else (the beneficiary) or for a lawful purpose.

Legal title is usually in the trustee, but the beneficial or equitable ownership is in the beneficiary.

2. Basic classifications

Express vs. Implied trust
- Express trust – created by the direct and positive act of the trustor, usually in writing, showing clear intent to create a trust.
- Implied trust – not created by explicit declaration; arises by operation of law from the acts or circumstances (resulting or constructive trusts).
Resulting vs. Constructive trust (under implied trusts)
- Resulting trust – arises to give effect to the presumed intention of the parties (e.g., A pays for land but title is in B’s name).
- Constructive trust – imposed by law to prevent unjust enrichment or fraud (e.g., property acquired through abuse of confidence).
Private vs. Charitable/Public trust
- Private trust – specific, identifiable beneficiaries.
- Charitable/public trust – for a broad public/charitable purpose; beneficiaries may be indefinite (e.g., scholarships, relief of the poor).

For “trust creation requirements,” the focus is largely on express trusts, because implied trusts are created by law, not by a person’s formal act.

III. Legal Sources: Civil Code Framework

Key Civil Code ideas (paraphrased):

Trusts can be express or implied.
The general law on trusts (often from common law) applies suppletorily, as long as it is not inconsistent with the Civil Code.
No express trust concerning immovable property or any interest therein may be proved by oral evidence (must be in writing).
Implied trusts may be proved by oral evidence.

From these, we derive the core creation requirements.

IV. Essential Requirements for a Valid Express Trust

A valid express trust under Philippine law requires several elements. Courts and commentators consistently look for these:

A competent trustor (settlor)
A competent trustee
A clearly identifiable trust property (trust res)
Clear intention to create a trust
A lawful trust purpose
Ascertainable beneficiaries (for private trusts) or a valid charitable purpose
Acceptance by the trustee (express or implied)
Compliance with the required form, especially for immovable property and testamentary trusts

Let’s expand each.

1. Capacity of the trustor (settlor)

The trustor must generally have capacity to dispose of the property (similar to capacity to donate or contract).
Minors and those under certain disabilities cannot validly create trusts over property they cannot validly dispose of.
Juridical persons (corporations, foundations, associations) may create trusts if:
- The act is within their corporate powers; and
- Not prohibited by their charter or by law.

If the trust involves community or conjugal property, additional rules from the Family Code on consent and disposition of spousal property may apply.

2. Capacity and qualifications of the trustee

Any person with capacity to acquire and manage property may be a trustee, unless prohibited by law or by the nature of the property.
Trustees can be:
- Natural persons
- Juridical persons, such as banks with trust licenses (under banking laws and BSP regulations)
The same person can sometimes be trustor and trustee, or trustee and beneficiary, but cannot usually be the only person on both sides (you cannot hold property in trust for yourself alone in a way that is meaningless or illusory).

Certain statutes require that only qualified entities (e.g., trust departments of banks) act as trustees for specific regulated trust arrangements (UITFs, pre-need trust funds, retirement funds).

3. Identifiable trust property (trust res)

There must be specific, identifiable property:

Real property (land, buildings, real rights)
Personal property (cash, shares, receivables, intellectual property, etc.)
A “future” property in some cases, but generally:
- There must be sufficient certainty so that the trust can be executed.

A trust over property that the trustor does not own or cannot dispose of is generally void, except in limited situations (e.g., after-acquired property validly covered by a will).

4. Clear intention to create a trust

The intention to create a trust must be:

Manifested clearly, not merely implied from vague or casual language.
Expressed in a form that leaves little doubt that the transferor is not simply donating, loaning, or selling, but wants the recipient to hold the property for another.

In an express trust, the intention is normally spelled out in a written trust instrument (trust deed, declaration of trust, will, contract), detailing:

That the transferee holds “in trust”
For whom
For what purposes and under what conditions

If intention is unclear, courts may:

Conclude there is no trust, only a different relationship (e.g., agency, loan, co-ownership); or
In appropriate cases, infer an implied trust instead of an express trust.

5. Lawful trust purpose

The purpose of the trust must be:

Lawful,
Possible, and
Not contrary to morals, public policy, or public order.

Invalid purposes (e.g., to hide illegal wealth, to defraud creditors, to evade mandatory succession rules in a clearly abusive way) may render the trust:

Void, or
Subject to being disregarded so that creditors, compulsory heirs, or the State may assert their rights.

6. Ascertainable beneficiaries or charitable purpose

For private trusts:

Beneficiaries must be determinable, even if not individually named at the outset (e.g., “my grandchildren living at the time of distribution”).
A trust “for people I like” with no standards is too vague and may fail for uncertainty of beneficiaries.

For charitable/public trusts:

Beneficiaries may be indefinite, but the purpose must be:
- Clearly charitable (education, poverty relief, religious or civic purposes, etc.)
- Lawful and not against public policy

If there are no beneficiaries at all, and the trust is not charitable, the trust can fail and the property may revert to the trustor or his/her estate.

7. Acceptance by the trustee

A person cannot be forced to be a trustee.
Acceptance may be:
- Express (signing the trust deed, written consent)
- Implied (actually taking possession of property and acting as trustee)

If a named trustee refuses or becomes incapable:

A court or relevant authority may appoint a replacement trustee, especially where beneficiaries’ interests or public/charitable purposes are at stake.

8. Form and formalities

This is where many trusts succeed or fail, especially when real property is involved.

a. Trusts involving immovable property

For express trusts concerning immovables or any interest therein, the Civil Code rule is:

No express trust concerning immovable property or any interest therein may be proved by parol evidence.

Meaning in practice:

The trust must be in writing (deed, contract, will, declaration) to be provable as an express trust.
Oral evidence alone is not sufficient to prove an express trust over land or real rights.

Common practice:

Execute a notarized deed of trust or a deed of conveyance that states that the transferee holds in trust.
Annotate the trust on the Transfer Certificate of Title (TCT) or relevant title/document in the Registry of Deeds, when appropriate, to protect beneficiaries and put third parties on notice.

If there is no written evidence, courts may still recognize an implied trust (resulting or constructive), but then you are no longer relying on “express trust creation requirements”; you are relying on equitable doctrines and factual inferences.

b. Trusts involving movable property

For movable property:

There is more flexibility.
An express trust may theoretically be created orally, but may be subject to the Statute of Frauds (for certain transactions) and practicality of proof.
Written documentation is still strongly advisable to avoid disputes.

c. Testamentary trusts

Trusts created by will (testamentary trusts) must comply with:

All the formal requirements of a valid will under the Civil Code:
- Holographic or notarial,
- Proper formalities (signatures, witnesses, attestation, etc.), and
The will must be probated (judicially allowed) for the testamentary provisions, including the trust, to be legally effective.

If the will is invalid for want of form, the testamentary trust fails, except in rare cases where a similar result arises by implied trust or other doctrines.

d. Registration, licensing, and regulatory compliance

For many commercial and financial trusts, creation also involves:

Registration of instruments (e.g., with Registry of Deeds, SEC for some instruments, or the appropriate regulatory agency),
Trustee licensing (trust departments of banks, pre-need trustees, etc.), and
Tax registration (obtaining a TIN and complying with tax filings as a trust or estate, when applicable).

Failure to comply with regulatory or tax requirements may not always void the trust as between parties, but can lead to:

Tax deficiencies and penalties
Administrative sanctions
Practical obstacles in enforcement and asset transfers

V. Implied Trusts: Creation by Law, Not by Intention

While the question focuses on “creation requirements,” it is essential to understand that in the Philippines:

Many trust disputes involve implied trusts, especially over land and family property.

1. Resulting trusts

Typically arise when:

A person pays for property, but title is placed in another’s name (e.g., to avoid taxes, to accommodate a relative).
The law presumes that the titleholder holds in trust for the payor, absent contrary intention.

Creation requirement here is not a formal act, but specific factual patterns that trigger the legal presumption.

2. Constructive trusts

Arise when:

Property is acquired through fraud, mistake, abuse of confidence, undue influence, or other inequitable conduct.
The law imposes a constructive trust on the wrongdoer, treating them as a trustee for the person who ought in equity to have the property.

Again, there is no “trust deed”. The “creation” is an operation of law to prevent unjust enrichment.

Implied trusts may be proved by parol (oral) evidence, unlike express trusts over land.

VI. Special Trust Regimes in Philippine Law

Apart from the Civil Code, several areas of law recognize or require trusts, each with additional requirements.

1. Bank and investment trusts

Under banking and related regulations:

Banks with authority to engage in trust and other fiduciary business may:
- Administer Unit Investment Trust Funds (UITFs)
- Manage personal or corporate trust accounts
Requirements include:
- Prior authorization from the Bangko Sentral ng Pilipinas (BSP)
- Internal trust rules, separate records, and safeguards
- Proper disclosure to clients

Trust agreements here are typically standardized contracts with detailed provisions on investment powers, fees, risk, and reporting.

2. Pre-need and similar trust funds

Pre-need companies and some regulated businesses are required by law to:

Maintain trust funds for the protection of planholders (e.g., educational, pension, memorial plans).
Appoint qualified trustees, often banks with trust licenses.
Keep the trust funds legally separate from company operating funds.

These trusts are statutory, and creation must follow the specific law and its IRR, not just general Civil Code principles.

3. Retirement and employee benefit trusts

Employers often establish:

Retirement fund trusts for employees
Profit-sharing or stock-option trusts

Creation requirements typically include:

Trust agreement complying with labor, tax, and procurement of approvals (if seeking tax-qualified status for contributions).
Appointment of a trustee (often a bank or trust corporation).

4. Real Estate Investment Trusts (REITs) and related structures

For REITs and certain capital market instruments, trustees (e.g., bank trust departments) hold assets or act on behalf of investors. Their creation is governed by:

The specific REIT law and regulations,
SEC rules, and
Trust and fiduciary regulations of BSP.

VII. Trusts Created by Will vs. Inter Vivos Trusts

1. Inter vivos (living) trusts

Created during the lifetime of the trustor:

Usually via notarized trust deed or declaration
Can be revocable or irrevocable, depending on the terms
Transfer of trust property must comply with:
- Formalities for the particular type of property (sale, donation, assignment, registration)
- Tax rules for donations, documentary stamps, etc., when applicable

2. Testamentary trusts

Created at death, through a will:

Governed by the law on succession
Must respect legitime of compulsory heirs; excessive provisions in trust form may be reduced
Must be probated; the court oversees or recognizes the trustee’s appointment and powers.

VIII. Tax Considerations at Creation

While not strictly about “validity,” tax rules affect how trusts are created:

Donor’s tax / estate tax – Transfers to trusts may be treated as donations or testamentary transfers, subject to corresponding taxes and exemptions.
Income taxation of trusts and estates – A trust is often treated as a separate taxpayer, required to register with the BIR, obtain a TIN, and file returns.
Documentary stamp tax (DST) – Trust instruments and transfers may attract DST, depending on their nature (deposits, investments, etc.).

Non-compliance may result in tax liabilities and penalties but does not necessarily erase the trust between parties unless law expressly so provides.

IX. Practical Steps to Properly Create an Express Inter Vivos Trust

In practice, to meet Philippine trust creation requirements for a typical private trust, parties usually:

Clarify the purpose and structure
- Private or charitable?
- Revocable or irrevocable?
- Duration and conditions?
Confirm capacity and consents
- Trustor’s legal capacity and ownership of the property
- Trustee’s capacity and willingness to serve
- Spousal or corporate approvals if needed
Identify and describe the trust property
- Detailed description of land (title number, area, boundaries)
- Detailed description of movables (e.g., shares, amounts, account numbers, intellectual property)
Draft a comprehensive trust deed
- Parties: trustor, trustee, beneficiaries (or charitable purpose)
- Powers and duties of trustee
- Distribution rules (income vs. principal)
- Duration and termination
- Rules on replacement of trustee
- Governing law and dispute resolution
- Provisions for accounting, reporting, and fees
Execute with proper formalities
- For land or real rights: notarization, and where advisable, annotation on title.
- Compliance with forms required by special laws (e.g., banking, pre-need, retirement funds).
Effect actual transfer of property to the trustee
- Change of ownership in the Registry of Deeds, corporate books, or relevant registries.
- Delivery of movable property (physically or via assignment/transfer).
Register and comply with regulation/tax
- BIR registration for the trust (TIN, books, tax filings).
- BSP/SEC or other regulatory procedures for specialized trusts.

X. Common Pitfalls Rendering Trusts Vulnerable

No written proof for trust over land – leads to difficulty proving an express trust; parties may be forced to rely on implied trust theories.
Unclear or contradictory language – courts interpret against the drafter in contracts of adhesion.
Ignoring family and succession rules – trusts used to “defeat” compulsory heirs can be questioned or reduced.
Failure to transfer title or possession – trust looks valid on paper, but if no property actually moves, enforceability is weakened.
Lack of regulatory compliance for financial trusts – may result in sanctions and tax issues.

XI. Conclusion

In the Philippines, trust creation is governed by a mix of Civil Code principles, special statutes, and regulatory rules:

Express trusts require:
- A capable trustor and trustee
- Clear intention
- Definite trust property
- Lawful purpose
- Determinable beneficiaries (or a valid charitable objective)
- Trustee acceptance
- Compliance with form—especially written evidence for immovables and formalities for wills.
Implied trusts arise by operation of law from conduct and circumstances, especially in family and property disputes.
Special trust regimes (banking, pre-need, retirement, REITs) have additional statutory and regulatory requirements, including licensing, registration, and strict safeguarding of beneficiaries’ interests.

Because trusts interact with property law, family law, tax, banking regulation, and succession, anyone contemplating creation of a significant trust in the Philippines should consider consulting counsel to ensure:

The trust is valid and enforceable,
It respects compulsory heirship and creditor rights, and
It is structured efficiently for tax and regulatory compliance.