MALTA

2. Trusts

The Hague Convention on the Law Applicable to Trusts and on their Recognition, 1 July 1985, was ratified by Malta in 1994.

The Trusts and Trustees Act (hereafter the Act) came into force on 1 January 2005. The Malta Financial Services Authority (MFSA) is the regulator for financial services in Malta and is the authority responsible for the regulation, supervision and authorisation of trustees in Malta.

Today, a trust under Maltese law is defined as 'an obligation, which binds a person or persons to deal with property over which they have control for the benefit of persons or for a charitable purpose in accordance with the terms of the trust'. Maltese law may be chosen as the law governing the said trust, and the settlor and beneficiaries may also be Maltese residents.

Where the proper law of a trust is a foreign law, the Act provides that the validity of the trust, its construction, its effect and its administration shall be governed by the foreign law concerned, recognised and given effect to in Malta in accordance with the Hague Convention and the Act.

The Act provides a framework for professional and private trustees. A professional trustee has the following characteristics: receives property on trust or agrees to act as trustee, is remunerated, acts on a regular basis and holds themselves out to be a trustee. Corporate trustees are allowed under the Act. A resident professional trustee is required to obtain authorisation from the MFSA, regardless of which proper law one decides to use.

Entities licensed under other financial services laws may only require notification to the MFSA; this may also apply to licence holders from other approved jurisdictions.

Trusts under Maltese law can be created in any manner, including: (i) verbally; (ii) through an inter vivos agreement; (iii) through a will; (iv) by a unilateral declaration of trust; (v) by operation of law; or (vi) by judicial decision. As a result of this relative ease by which trusts can be set up, Malta is today witnessing both traditional and more innovative uses of trusts. Examples include estate planning in the long term and for ensuring continuity in the management of one's affairs; preventing the breakdown of family wealth; enabling the unified holding of assets; making up for lack of capacity; and various uses in the commercial sphere, such as collective investment schemes and collective security trusts. Although traditionally set up as corporate vehicles (as SICAVs), more recently Maltese trust law has also been successfully applied to the establishment of collective investment schemes such as unit trusts, with an umbrella-type structure, much like the ones popular for some time in Jersey, used by a professional investor fund, licensed by the MFSA.

Maltese trusts have the typical features one expects of a traditional Anglo Saxon trust. A Maltese trust (other than a charitable trust and a unit trust) can only exist for a maximum of 100 years. The Act provides detailed rules regulating the rights of beneficiaries to information in relation to a Maltese trust (and the manner in which this can be addressed in the trust instrument), which reflect the prevailing international jurisprudence in this field. Another feature of the Maltese trust is the limited liability afforded by a trust, where a claim by a third party only extends to the trust property (in those cases where the trustee informs a third party that he is acting as trustee). The Act also provides for a robust series of remedies to safeguard the interests of the beneficiaries of the trust, including the tracing of property where such property has been alienated in breach of trust.


Advert

Article Search

© 2012 Society of Trust & Estate Practitioners