A trust is a legal relationship whereby a settlor transfers the property of an object to a trustee. The trustee is bound to hold (and in some cases administer) that object for the benefit of one or more beneficiaries.

Maltese trusts have been around for over thirty years. Although trusts find their origins within the English common law system, one can safely say that they fit in quite comfortably within the Maltese legal system, which is essentially a civil law system. At one point, Maltese trusts were only available to foreigners, but after substantial legislative reforms it became possible for Malta residents to set up a trust. Of course this has permitted local legal practitioners to offer innovative solutions to their clients. On top of that, it is even possible for a person to opt for the setting up of a foundation (an institute which finds its roots in civil law systems). It is worth noting that Malta is one of the few jurisdictions which caters for both trusts and foundations.

Trusts can be set up in order to safeguard and protects assets for the use of future generations, as well as keeping the enjoyment of particular assets ‘within the family’. They can also be used to cater for the educational or the medical needs of one’s family. One can also set up a trust in order to address a charitable purpose. Indeed, if there is one legal institute which arguably surpasses all the rest in terms of the flexibility which it offers, it is the trust. The Maltese legal system is flexible enough to cater for a number of different trusts – from fixed to discretionary trusts, from maintenance trusts to spendthrift trusts. Of particular interest are unit trusts, which can be used in a number of commercial transactions and are very useful to the financial services sector.

On top of this, it is very easy to set up a trust – a private writing or a will would typically suffice. Having said so, it is recommended that one always seeks expert advice before doing so. In fact, legal practitioners can help cater for certain safeguards while drafting the instrument of trust. They can also assist with the drafting of letters of wishes as may be appropriate, as well as recommending the appointment of protectors. The role of protectors can generally be described as that of guardians who ensure that the terms of the trust and the original intentions of the settlor are actually being implemented, while guarding against potential abuse by the trustee.

Our law also recognizes foreign trusts. Essentially this means that a foreign trust created under a different legal regime can be enforced in Malta. Of course this provides legal certainty and therefore peace of mind.

Although the use of Maltese trusts has been increasing steadily over the years, its use so far by Maltese residents has not been particularly widespread (especially outside the commercial sphere). This could be attributed to a number of factors, among which there is a general reluctance by local practitioners to rely on a common law institute in cases where a civil law institute would more or less meet the same needs. Having said so, this trend is changing slowly but surely. In time, our courts will have accumulated a wealth of jurisprudence which will undoubtedly offer a degree of legal certainly and thus make the institute of trusts more palatable. Moreover, the fact that professional trustees are very rigorously regulated by the MFSA helps address the psychological barrier on the part of would-be Maltese settlors to part with the ownership of their property and transfer it to a trustee.



Leave a Reply

Book a meeting with our specialists!