Malta introduced the concept of Trusts into its legal system in 1988 through the enactment of the Offshore Trusts Act. In 2004, the Trust and Trustees Act (“the Act”) followed as the first Act regulating domestic trusts in Malta. A Trust exists where a person holds, as the legal owner or has vested in him property under an obligation to deal with that property for the benefit of other persons. Therefore, by definition, trusts create fiduciary obligations upon the trustee in favour of the beneficiaries of the trusts. The settlor of trusts is the individual or juridical person that settles the assets or property in trust. Whereas the trustee is typically authorized by the Malta Financial Services Authority to provide trust services.
As such and practically:
Since the introduction of the Act within the Maltese legal systems, Trusts have provided its users with effective:
- Asset protection
Trust property constitutes a separate fund owned by the trustee, distinct and separate from the personal property of the trustee and from other property held by the trustee under any other trusts. Therefore, upon settlement of the trust property by the settlor(s), assets are transferred to the trustee who holds legal ownership. Furthermore, the holding of property under trusts will have the following legal effects:
- Personal creditors of the trustee have no recourse against the trust property.
- The trust property will not form part of the trustee’s personal estate upon his insolvency or bankruptcy.
- The trust property will not form part of the matrimonial property of the trustee or his spouse nor part of the trustee’s estate upon his death.
This mechanism therefore enables assets protection.
A Trust offers unique opportunities to establish a structure tailored to the needs of its settlors. Common functional uses of Trusts include estate planning, tax planning and charities. The various considerations included in the trust deed (the Trust’s operating manual) are highly flexible, ensuring that users participate in a tailored vehicle – pros that other standard structures are unable to meet.
Unlike Foundations, which are established via a Public Deed or Will published in the records of a notary public, Trusts are established by means of a private writing. This creates an element of confidentiality which is synonymous with Trusts.
Most Trusts continue until the 125th anniversary of the date on which they came into existence. This therefore implies both continuity and longevity which are concepts fundamentally associated with Trust structures. In practice therefore, a Trust is not dependent on the settlor’s existence for the trustee to carry out his duties intrinsic to the initial wishes and as dictated by the Trust deed.
As Trust structures are highly associated with fiduciary obligations vested upon the trustee in favour of the beneficiaries, the selection of the trustee is always a critical decision. In any fiduciary arrangement, integrity, customer-orientation, and excellence are key constituents for a successful long-term relationship. Visit our values and learn more about us to see how the MJM can help you nurture and implement your visions and needs.
While trustees can be both individual or juridical persons, they must act with the prudence, diligence and attention of a bonus paterfamilias (i.e. acting in utmost good faith and avoid any conflict of interest) in the execution of their duties and the exercise of their powers and discretion. Users of a Trust structure must take special care whilst selecting a trustee. MJM is authorised by the Malta Financial Services Authority to act as trustee (click here) and our values constitute a combination of excellence (developed by years of practice and operating with settlors, protectors and beneficiaries to understand their needs and exceed expectations) and integrity (derived from our utmost commitment of ethical practice and compliance with various onerous regulations).
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At MJM our team of professionals can provide you with bespoke and over-arching services including but not limited to: