Concept of Property Trust Law
Property trust law in the Republic of Lithuania refers to the trustee’s right to manage, use, and dispose of entrusted property under the conditions and procedure established by the trustor.
According to a trust agreement, one party (the trustor) transfers their property to another party (the trustee) for a fixed period. The trustee is obligated to manage, use, and dispose of the property in the interests of the trustor or a designated beneficiary. The trust is established for personal, private, or public benefit. Importantly, the property ownership remains with the trustor.
In Lithuania, the legal grounds for the emergence of trust rights include: legislation, administrative acts, contracts, wills, or court rulings. Public and municipal institutions in the Republic of Lithuania manage entrusted state or municipal property under their statutes and applicable legal norms, ensuring no infringement on other parties’ rights or interests. Other legal and natural persons manage entrusted property in accordance with the applicable agreement, law, or court ruling.
Trust property may include movable or immovable assets, securities, or other types of property. State or municipal property managed by public entities in Lithuania cannot be further entrusted to third parties unless the entity is being liquidated or reorganized, or as otherwise provided by law.
Key Terms of a Property Trust Agreement
The trust agreement in Lithuania must include:
- The property being entrusted;
- The trustor, trustee, and beneficiary (if any);
- The trustee’s compensation and payment method, if applicable;
- The duration of the agreement.
A trust deed may not be concluded for a period longer than 20 years. The law may provide for longer maximum periods of validity. If, at the end of the term of the contract, neither party declares its termination, the contract shall be deemed to have been renewed under the same conditions for a new term of the same duration.
The trust deed must be in writing. The trust deed must be in notarial form. It may be used against third parties only after it has been registered in the public register in accordance with the procedure laid down by law. Failure to comply with the requirements of the form of the contract renders the trust deed null and void.
A trustee who fails to properly manage the entrusted property and the interests of the trustor and the beneficiary is liable to compensate the beneficiary or the trustor for any losses resulting from the loss or damage of the property, as well as for lost income. The trustee is released from liability if they prove that the losses occurred due to force majeure or the actions of the trustor or beneficiary. If the trustee enters into a transaction that exceeds the granted authority or violates the restrictions set in the agreement, the trustee is personally liable for such a transaction. Debts arising from obligations incurred while managing, using, or disposing of the entrusted property shall be paid from the entrusted property. If that property is insufficient, recovery shall be made from the trustee’s assets, and if those are also insufficient – from other assets of the trustor.
Grounds for Termination
The trust ends when:
- When the beneficiary dies or is wound up, unless the contract provides otherwise;
- When the beneficiary renounces the benefits of the contract, unless the contract provides otherwise;
- When the trustee dies, is declared incapacitated, is declared incapacitated, is declared mentally incapacitated, is declared of limited legal capacity, or is dissolved or is dissolved;
- When the trustee is made a bankrupt;
- When the trust or the trustee withdraws from the contract on the basis of the trustee’s inability to carry out the contract himself or herself;
- Where the trustee withdraws from the contract on other grounds and pays the trustee the remuneration set out in the contract and the necessary expenses incurred as a result of the termination.
Notice of termination must be given at least six months in advance, unless the agreement provides a different term. Upon termination, the trustee must return the property unless agreed otherwise.