Malta is one of few civil law jurisdictions that has developed its own trust related law, which is regulated by the Trusts and Trustees Act, Chapter 331 of the Laws of Malta. The Act provides for the creation of trusts and the authorisation and supervision of trustees by the Malta Financial Services Authority (MFSA).
Malta has furthermore ratified the Hague Convention on the Law Applicable to Trusts and on their Recognition and incorporated the terms thereof into domestic law. As a result, a trust governed by a foreign law would be recognised in Malta even when all other elements of that trust were Maltese.
FORMATION AND ADMINISTRATION
Trusts are generally constituted by means of a formal private agreement or a will, but they can also be created by simple declaration of a trustee, or by operation of law, or result from a court judgment. A trust is validly constituted when the trust property is transferred by the settlor to the trustee selected for a purpose. A trust may exist for a maximum of 125 years. This limit does not, however, apply in respect of a trust created for a charitable purpose or a unit trust or a qualifying retirement scheme set up as a trust.
A trustee is dutybound to hold and administer the said property for the benefit of the beneficiaries, whether named or identified by reference to a class of persons. It is worth highlighting that trust property is held separately from the property of the trustee’s personal assets. The trustee, through vested ownership in the trust property has the power and duty to administer, employ and dispose of the trust property. In its role, the trustee owes a fiduciary obligation towards the beneficiaries in the management of the trust assets.
TYPES OF TRUSTS
Trusts, being a flexible tool can provide various solutions to individuals and organisations for asset protection, including but not limited to the following:
- Estate and Succession Planning tool for families which cater for different needs of different family members in their lives, considering the circumstances which they are in at any given point in time. The fact that one can give the Trustee discretion on how to administer and distribute the estate for the benefit of family members, this enables the Trustee to take into consideration the circumstances surrounding the relevant family member at a given point in time, which circumstances may be difficult to foresee upon set-up.
- Estate Division Trusts whereby the trustee will become the legal owner of the estate following a person’s demise, with the aim of dividing the estate between the heirs. This trust will be purely administrative and will be bound by the rules set out in the relevant trust instrument with the final objective to distribute the estate to the heirs. The trust will then terminate upon the distribution of the estate to the heirs.
- Security Trusts can be used to hold assets, or rights over assets (such as a hypothec, pledge or mortgage, amongst others) as security over a debtor for an underlying obligation, such as a bond issue.
- Employee Benefit Trusts can be set-up by Employers in its implementation of employee benefit scheme, as part of its staff retention efforts. Typically, such a trust would hold assets (such as shares) which are to constitute the benefit which will be granted to employees upon fulfilment of the terms of the relevant employee benefit scheme.
For further information with regards to the constitution of a Trust, kindly contact firstname.lastname@example.org