Problems in Japanese Law Concerning
Welfare Uses of Trusts
Tsutomu Sato（Nanzan University）

In Japan, the population is aging rapidly, and there are thelarge gaps of the financial asset between elderly people and working
generation. Under these social conditions, increasing in the use of“Property Management Trusts”and“Property Transfer Trusts”
is anticipated. A settlor wishes to protect the Beneficial Interest (orthe Trust Property) in neither trust from the risk of alienation nor
bankruptcy. This article examines“Restrictions on Alienation”and“Forfeiture Clauses”.
In UK, a settlor may be happy to give a beneficiary a Beneficial
Interest, but may like to avoid that Beneficial Interest being paidor delivered to beneficiary’s creditors if that beneficiary becomesbankrupt. However, the settlor’s wish has two overriding fundamental
points. First, the proviso or the condition in a trust agreement is notto be subject to the Claims of the beneficiary’s creditors will be void
against public policy in the Bankruptcy Act. Secondly, the proviso thatBeneficial Interests shall not be alienated will be void.
Therefore, trusts in UK, so called the Protective Trusts, use thedevice of a terminable vested interest to create the interests which
determine in the event of alienation or attempted alienation by thebeneficiary, or if other events occur which bring about a disposition of
the interest, such an insolvency.
― 159 ―

信託法研究第43号（2018）

However, the proviso or the condition in the Protective Trust to
prevent the beneficiary’s creditors from reaching hers interest raises
three issues concerning its effective: there are as follows:(1) Where a person has created a trust with intend to defraud
creditors, the court may make such order as it thinks for restoring theposition to what it would have been if he has not created such a trust,and protecting the interests of persons who are victims of creatingsuch a trust.
(2) A person cannot protectively settle his own property on theProtective Trust contrary to public policy.
(3) Where the trust has been created for the purpose of putting
them beyond the reach of a person who is making or may at sometime make a Claim against him, or otherwise prejudging the interestsof such a person in relation to the Claim which he is making or may
make, the transaction may become void.
Under the Japanese Trust Act, a Beneficial Interest may be
assigned; provided, however, that, “the nature thereof does notpermit said assignment”, or“the provisions of the Terms of Trust
provide for the prohibition or the restriction on assignment thereof”.
Under the Japanese Civil Code, a Claim’s“nature does not permit theassignment”is understood as follows:(1) Due to the nature of payment or delivery by the obligor,
that obligor ought to pay or deliver to the original creditor, and thatpayment or delivery to third parties except the original creditor
cannot achieve an original purpose of the Claim.
(2) Due to the social policy, the obligor ought to pay to anauthorized creditor.
At the point of the property, the Beneficial Interests are rights― 160 ―

similar to the Claims. Therefore, the principle of the assignment of theClaims apply to the assignment of the Beneficial Interests.
However, because of the trustee is obliged to administer or
dispose of the property in accordance with the Purpose of the Trust,the change of beneficiary has a serious influence on the performanceof trustees’ obligation. Therefore, the concept of“the nature thereof
does not permit said assignment”in the Trust Act is the same as theconcept in the Civil Code, but, in the case of the Beneficial Interest,
whether the Beneficial Interest has“the nature thereof does notpermit said assignment”should be justified in the consideration of thePurpose of the Trust.
In the case of the forfeiture of the Beneficial Interest under theForfeiture Clauses, there is not obligor’s act that may be avoided.
The Forfeiture Clauses are not contrary to public policy. Because thesettlors have intention to prejudice the beneficiary’s creditors with
the Forfeiture Clauses themselves, and such clauses don’t have theprincipal purposes.

― 161 ―