Property Trust

In the real estate field of Puerto Vallarta and Riviera Nayarit, the trust is a widely used figure, especially in operations involving foreign buyers. It is a three-party contract: the settlor (who transfers an asset or right), the trustee (who receives it to administer it) and the trustee (who receives the established benefits). In Mexico, unlike other countries, only banking institutions can act as fiduciaries, which provides a regulated and secure framework for this type of agreement.

One of the most relevant is the Property Trust (known in Spanish as Fideicomiso Patrimonial), which is designed to transfer, manage and protect assets as part of an estate planning strategy. In this, the owner can establish that, after his death, certain assets pass directly to their beneficiaries, without the need for a testamentary judgment.

In order to offer a complete vision from a legal and accounting point of view, the Vallarta Real Estate Guide editorial team brought together two renowned specialists: David Connell, partner and manager of the law firm Connell & Associates and Jorge Cadena, CEO of Cadena Business Advisors, to detail how this tool works and why it can be strategic for those looking to protect their wealth in the region.

Beyond its legal definition, the Property Trust has become a highly valued planning tool for families, entrepreneurs and property buyers in the region. In destinations such as Puerto Vallarta and Riviera Nayarit, where people of different nationalities and with different levels of wealth converge, having a flexible yet firmly grounded legal instrument is essential to ensure the continuity and security of assets. Experts point out that its adoption has grown not only because of the dynamics of the real estate market, but also because it provides peace of mind in the knowledge that assets will not be subject to lengthy and uncertain processes. Thus, the Property Trust is more than just a contract; it is an act of foresight in which property owners anticipate possible scenarios and establish clear rules for the future of their assets.

HOW IT IS CONSTITUTED AND WHO PARTICIPATES

The constitution of a Property Trust begins with the intervention of professionals (notary, lawyer and, sometimes, real estate agent) who guide the client in the selection of the trust bank. Although not all banking institutions offer this service, most do. Each bank has a specialized department that classifies contracts according to their nature.

Once the bank has been chosen, it requests the corresponding permit from the Ministry of Foreign Affairs, a process that takes about two weeks. Subsequently, the documentation is reviewed to ensure that it is complete and, finally, the deed is signed before a notary and registered. The process usually takes between 60 and 90 days, depending on the bank’s efficiency and obtaining permits.

LEGAL AND TAX BENEFITS

One of the main advantages of the Property Trust is its ability to speed up the transfer of assets after the death of the owner. Simply submit the death certificate to the bank for the assets to pass to the designated beneficiaries, avoiding a probate judgment that could take months or even years. This process can be completed in around two months, reducing the risk of legal disputes.

In addition, in large estates, the Property Trust allows the continuity of family businesses to be structured through a Technical Committee that regulates the destination of income and assets, establishing percentages for family members and ensuring the operation of the business.

“The Property Trust is a tool to shield assets and guarantee the continuity of companies and family assets, but it implies a higher cost and tax obligations,” says Cadena.

EXAMPLES AND USES

In Puerto Vallarta and Riviera Nayarit, Property Trusts are often used to ensure that second homes, vacation rental properties, or even family real estate developments are passed on smoothly to children or grandchildren. They are also prevalent in cases where an investor wishes to leave productive assets (such as a rental building or a fully operational business) to multiple heirs, preventing the property from being divided or sold in a hasty manner.

Another common scenario is that of binational families who own property in the area and wish to simplify the transfer of assets to heirs living abroad, avoiding conflicts of jurisdiction.

RISKS AND MISTAKES TO AVOID

Although the Property Trust offers extensive advantages, its implementation without adequate advice can generate complications. Among the most frequent errors are not clearly defining the beneficiaries, omitting specific rules on the management of productive assets, or not providing for conflict resolution mechanisms. It is also essential to consider the fiscal impact, as poor design could lead to unnecessary tax burdens or even penalties.

Connell stresses that the key is to plan ahead: “A trust must be constituted calmly and conscientiously. It requires a detailed analysis of assets, family relationships, and long-term goals.”

A STRATEGIC TOOL

Both Connell and Cadena agree that the Property Trust is one of the most effective tools to protect real estate and ensure that it is passed on in an orderly and secure manner to the next generations. Its usefulness is multiplied in a market such as Puerto Vallarta and Riviera Nayarit, where the mix of national and foreign residents and binational assets requires flexible but solid solutions.

In a context in which planning the inheritance is no longer an exclusive issue of large fortunes, but a necessity for any owner looking to avoid conflicts, the Property Trust is presented as a reliable alternative. The recommendation of both specialists is clear: get informed, analyze the options and work hand in hand with legal and accounting professionals with experience in the field.