You know what? When I started working with trusts about 15 years ago, they were seen as strange and complicated instruments. Today, after structuring over 70 of them for all types of companies, I can tell you they’ve become one of the most versatile tools in the Uruguayan legal arsenal.
What is a business trust really?
Look, I always like to explain it with this analogy: imagine you have a very special safe. In it you can store valuable assets (from real estate to collection rights), but what’s interesting is that you can program exactly who has the keys, who can see what’s inside, and who receives the benefits… even after you’re gone!
In legal terms, it’s a contract where one person (settlor) transfers assets to another (trustee) to manage them for the benefit of a third party (beneficiary).
Important fact: I’ll tell you something curious I’ve noticed in my practice: between 2020 and 2024, the number of business trusts registered in Uruguay increased by 42%. From 450 to over 640! And it’s not a passing fad – it’s that they really solve problems that other structures can’t handle.
Types of business trusts most used in Uruguay
I’ll share the ones I’ve implemented most in my experience:
Security trusts
The other day a client told me: “It’s like having insurance that actually works.” Yes, it’s true. Unlike traditional mortgages and liens, if the debtor doesn’t pay, you don’t have to go through endless lawsuits. The trustee simply executes the guarantee according to pre-established rules. I’ve seen processes that instead of years are resolved in weeks!
Administration trusts
I remember the case of a family business where the siblings couldn’t agree on anything, but they all wanted to keep the business together. The solution: we put the assets in a trust with a professional administrator. Now the siblings receive their benefits without having to talk to each other (although they eventually improved their relationship, ironies of life!).
Financial trusts
They’re more technical, but tremendously useful. Last year I worked with a medium-sized company that had millions in accounts receivable but needed immediate liquidity. We structured a financial trust that allowed them to obtain funds on the spot. The CFO confessed to me afterward: “You saved us from having to fire 20 people.”
Real estate trusts
Have you seen those impressive towers in Punta del Este? Many were built using trusts. They allow investors, developers, landowners, and construction companies to collaborate with clear rules. If any of the parties has financial problems, the project is protected.
Watch out for this! The most common mistake I see is people confusing trusts with corporations. I’ll explain it with an anecdote: a client insisted on “being the president of the trust” until I clarified that a trust doesn’t have a president or directors – it’s not a company, it’s a contract that creates a separate estate. His surprised face was memorable.
Constitution process step by step
After constituting so many trusts, I can tell you the process is like making a good paella – you need good ingredients and follow the correct order:
- Trust design: This step is CRUCIAL. I’ve seen clients who want to rush this stage and I always tell them: “For every hour you save in design, you’ll spend 10 solving problems later.”
- Contract drafting: This is where we lay down all the rules of the game. I like to sit with clients and ask them: “What if…?” to cover all possible scenarios.
- Notarial protocol: The contract must be elevated to public deed with a notary.
- Registry inscription: Depending on the assets, it must be registered in different places.
- Special registries: For financial trusts, you must register with the BCU.
- Tax implementation: Obtaining RUT and tax compliance.
Expert advice: “I once had a client who wanted to save on fees and used a generic contract template from the internet. Two years later, when a conflict arose between beneficiaries, he discovered the contract had huge gaps. It cost him $50,000 USD in litigation what he could have avoided with a good initial contract. Don’t skimp on design and drafting – it’s the foundation of everything.”
Comparison: Trust vs. Other Business Structures
| Aspect | Trust | Corporation | Limited Liability Company |
| Structural flexibility | High (like a tailored suit) | Medium (semi-customizable) | Low (one size fits all) |
| Asset separation | Total (complete blindness) | Partial (with exceptions) | Partial (with exceptions) |
| Confidentiality | High (except financial) | Medium (increasingly less) | Low (public records) |
| Constitution complexity | Medium-High | Medium | Low |
| Investor appeal | High for specific projects | High for companies in general | Limited |
Tax and strategic benefits
Here comes the interesting part. In my years structuring trusts, I’ve noticed many clients discover advantages they hadn’t even considered:
- They are IRAE taxpayers in their own right, which allows for tax planning
- They can apply specific exemptions according to their purpose
- Security trusts don’t generate additional taxable events
- They facilitate business succession by minimizing costs and impacts
Practical aspects to consider
I’ll share what I’ve learned in the trenches:
Trustee selection
This point is CRITICAL. I once had a client who insisted on appointing his accountant as trustee because “he trusted him.” Six months later we discovered that the accountant, although honest, didn’t have the experience to handle complex real estate investment decisions. We had to restructure the entire trust.
The trustee must have specific experience in the type of assets they’re going to manage. In Uruguay we have professional trustees specialized in different sectors.
Associated costs
Being transparent about costs is part of my professional philosophy:
- Design and constitution can cost between $2,000 and $8,000 USD depending on complexity.
- Notarial and registry expenses vary according to the assets.
- The trustee’s commission can be fixed, variable, or mixed.
- Maintenance costs include audits and supervision.
Term and termination conditions
Uruguayan law establishes a maximum term of 30 years, but I’ve seen most are established for 10-15 years with the possibility of extension.
Trade secret: “In complex or long-term trusts, I always include a ‘technical committee.’ It’s like having a small advisory board that supervises the trustee. It’s not mandatory by law, but it has saved many situations. I remember a case where the committee detected an investment opportunity the trustee had overlooked, generating 22% more profitability for the beneficiaries.”
Frequently Asked Questions about Business Trusts
What happens with the settlor’s previous debts?
I get this question in ALL initial consultations. The assets transferred to the trust are separated and don’t respond to the settlor’s personal debts, with one important exception: if it’s proven that the transfer was in fraud of creditors.
I’ll tell you a case I experienced: a businessman wanted to create a trust when he already had lawsuits in progress for several million. I had to tell him: “You’re too late. If we do it now, any judge will clearly see the intent to defraud.” Trusts are powerful but ethical tools – they’re not shields to evade legitimate responsibilities.
Can a trust be modified once constituted?
How many times have distressed clients called me about this! The answer is: it depends on what the original contract says. If we anticipated modification mechanisms (and I ALWAYS include them), it can be adapted. If it wasn’t anticipated… it’s complicated.
My practice is to include specific clauses that allow modifications by qualified majorities of beneficiaries or in certain circumstances. But always maintaining the original purpose.
What responsibilities does the trustee assume in Uruguay?
The trustee has more responsibilities than many people think. They must act as a “good businessman” and respond personally if they don’t.
An anecdote: I knew of a case (not mine) where the trustee mixed trust funds with their own to make a “temporary” investment. Although there was no bad faith and everything was returned, they were sued and personally convicted. Law 17.703 is clear that assets must be kept strictly separated.
What information about the trust is public in Uruguay?
Confidentiality is a legitimate concern. In ordinary trusts, there’s a good level of privacy – only what appears in specific asset registries is public. Financial ones are more transparent due to BCU regulation.
But watch out: with the new beneficial owner and money laundering prevention rules, there’s more information available to authorities although not to the general public. As I tell my clients: “The trust gives you legitimate privacy, not opacity for questionable activities.”
Current trends in business trusts
I’ll tell you what I’m seeing in my daily practice:
- Increase in trusts for renewable energy projects (especially solar and wind)
- More structures for protection of intellectual property and intangible assets
- Trusts that combine with other vehicles (like SAS) for greater flexibility
- Greater specialization of trustees in niches like technology and agribusiness
Notable fact: The other day I was reviewing a recent study that impacted me: Uruguayan companies that used trusts to structure investments captured 27% more external capital than those that used traditional structures. Why? Investors valued the transparency in governance rules and asset protection.
Conclusion: Beyond the legal fad
After so many years working with trusts, I can tell you they’ve gone from being a legal oddity to becoming fundamental tools for business planning in Uruguay.
If you’re considering implementing this structure, my sincere advice is: invest time in understanding it well. I’ve seen many cases where clients say “I just want to sign it quickly” and then have problems because they didn’t understand how it works or chose an inadequate trustee.
The difference between a successful trust and a problematic one isn’t on paper, it’s in the quality of its initial design, the choice of trustee, and the clarity of its rules.
