High flexiblity &wide ranging benefits
With roots that can be chased back to the 13th century, when Franciscan monks sought ways to circumvent rules that forbade them from owning property, the modern-day trust is a highly flexible vehicle offering a wide range of potential benefits and a large number of uses. The basic concept of a trust structure is that assets are transferred by the settler to a trustee who has a duty to manage them for the benefit of defined beneficiaries.
The trust has remained very much the same since its early inception. However there is now a series of regulations, which manage the relationships between the various parties of the trust. Whilst all trusts share similar core principles, there are certain distinctions between the three key types of trust:
This is the most commonly used type of trust. Named beneficiaries of class of beneficiaries do not necessarily have a fixed interest or equal interest in trust assets, but enjoy benefit levels at the discretion of the trustees. The trustee has discretion on payments being made from trust income (and sometimes capital), how they are made and to whom. This discretion is of particular benefit when there is a beneficiary unable to take care of his/her own interests – the trustee being able to make distributions according to individual circumstances.
Trust income is used to look after young people while they are minors. Any residue income will accumulate and is added to the trust assets, which will be distributed to the beneficiaries on or before their 25th birthday.
This is trust where the beneficiary has automatic and immediate right to income arising from trust assets. Normally this beneficiary will have no rights to the trust capital that will often pass to a second beneficiary in the future. These trusts are often used to give a widowed spouse a life long income with capital assets passing to offspring on his/her death.
Maltese Trustees, whether individual or corporate, are licensed by the Malta Financial Services Authority and operate within a tight regulatory environment. The jurisdiction’s reputation means clients can be confident in the level of service they can expect. Within the group we can also offer Guernsey Trust services which have some of the best regarded fiduciary legislation.
Given its historical provenance, the trust is a concept much more familiar to common-law than to civil law jurisdictions. Residents of civil law jurisdictions are therefore often more comfortable with the Foundation concept.
There are many advantages to using a Maltese trust within the EU or a Guernsey offshore structure, the main reasons are:
A trust structure can often avoid forced heirship issues which dictate in certain jurisdictions how assets are to be distributed on death. This can be particularly beneficial should there be a vulnerable family member who will require financial security into the future.
Family Wealth Preservation
This is a common motivation for establishing a trust structure, particularly where there is a family business involved. A settlor can avoid company shares being divided between a number of heirs on death, ensuring they continue to be managed centrally so that benefits are enjoyed by future generations.
In certain situations, trusts can be used to shelter assets from capital gains, income and inheritance tax. We work with a number of specialist tax advisers who assist us in creating bespoke structures for clients to attain their specific objectives.
Trust assets can at times be ring fenced to protect them from creditors.
Trusts can be established for charitable funding purpose. These trusts will not have named beneficiaries but offer a good deal of flexibility for making charitable donations either on a fixed annual basis or at the discretion of the trustees.