IN210 - Why Use A Trust And What Are The Benefits In Having Maltese Trustees?

Trusts have long been recognised as flexible vehicles for the holding of many types of asset. This note summarises the main reasons for using a trust and the benefits available through the use of Maltese trustees.

This article is not intended to be comprehensive and clients are recommended to seek professional advice on any proposed settlement.

What is a Trust?

A trust is a legally binding arrangement whereby a person (the settlor) transfers assets to another person (the trustee) who takes legal title to the trust assets. The trustee holds the trust assets for the benefit of other persons (the beneficiaries, which may include the settlor), or for a specified purpose.

There are many forms of trust that have been developed over time, some of the most common forms are:

• Accumulation and maintenance trusts
• Discretionary trusts
• Fixed interest in possession trusts
• Revocable trusts

Uses of a Trust

Trusts are used for a variety of reasons due to their flexible and confidential nature:

Preservation of wealth
The vesting of the legal title of the assets in the trustee prevents the ownership of the assets being diluted, when assets are distributed from the original owner to the second and then to the third generation. At the same time individuals can continue to benefit from the assets, such as a family business.

Circumvention of forced heirship laws
By divesting assets during the lifetime of the settlor, the trust will not form part of his estate upon his death, avoiding forced heirship rules which may apply under laws in the settlor’s country of residence.

Local advice should always be taken and assets settled into the trust should not be located in the jurisdiction with the forced heirship laws.

Succession planning
As the settlor no longer owns the assets, the need to obtain probate or similar formalities on his death can be avoided.

A trust is therefore an efficient vehicle for transferring the benefit of assets, such as property, through successive generations and provides a useful tax and financial planning tool for settlors.

Asset protection
Malta offers a secure and stable political environment in which to hold assets and protect them from strategic risk. In addition a trust can offer protection from creditors or other parties in the country of domicile or residence of the settlor.

Confidentiality
On the settlement of assets into a trust, those assets cease to form part of the estate of the settlor. The legal title passes to the trustee, whilst the rights to future enjoyment are passed to the beneficiaries.

Trusts formed under Maltese Law, are not required to file accounts with any public body, and there is also no requirement for the accounts to be audited.

Taxation of Trusts in Malta

Under Maltese Tax Laws, trusts are considered to be transparent in that income earned by the trust and distributed to the beneficiaries is not taxable in Malta, in the hands of the trustee.

Where the beneficiaries of a trust are not resident in Malta and there is no Maltese source income, the income will not suffer Maltese tax even if it is not distributed to the beneficiaries.

Duration of a Trust in Malta

Under Maltese Law a trust can continue until the 100th anniversary of the date of its creation.

Dixcart as Trustees

Dixcart has provided trustee and related trust services in Guernsey, the Isle of Man, Nevis, Switzerland and the UK for over thirty five years and has extensive experience in the formation and administration of trusts.

Dixcart can now provide trust services through its wholly owned group company Elise Trustees Limited which is licensed to act as a trustee by the Malta Financial Services Authority.

Additional Information

If you would like additional information on trusts in Malta please contact sean.dowden@dixcart.com.mt at our Malta office or contact us.