The wide variety of trusts and foundations available in Malta are mainly regulated by the Trusts and Trustees Act (Chapter 331 of the Laws of Malta). A trust is an obligation, binding a person or persons (called the ‘trustees’) to deal with property over which they have control (called ‘the trust property’) for the benefit of persons (called the beneficiaries) or for a charitable purpose in accordance with the terms of the trust.
Clients may set up three main types of trusts in Malta, these being the:
- Express trusts: In order to set up this kind of trust, the settlor must clearly and openly express his intention to set it up in a declaration concluded by him. This could be either unilateral, concluded either by a written instrument, such as a will, or even through an oral declaration. This is however subject to the exception of a unit trust, which must necessarily be created by means of a written instrument or an inter-vivos trust, which must be created by a notarial trust deed.
- Implied or resulting trusts: Implied trusts are trusts arising from the unexpressed but presumed intention of the settlor, which intention is presumed from his words or actions. Implied trusts are also resulting trusts since the property will return to the person setting up the trust; and
- Constructive trusts: These arise by operation of law and are in no way dependent on the intention of the settlor. They are imposed by operation of law or by means of a judicial decision, usually set up in order to avoid any unjust enrichment arising on behalf of any one of the parties.
A trust may continue to exist for a hundred years from the date on which it comes into existence, unless sooner terminated. However, this limit does not apply to a trust for a charitable purpose or to a unit trust.
Trusts and foundations may be incorporated for a number of reasons, namely to satisfy personal requirements, such as to cater for the needs of one’s family in case of death or sudden illness. By means of a trust, a person may safeguard his assets so as to ensure that these would be available, should the need for medical treatment, care subsistence or education arise. Trusts are also useful for tax planning as these are considered to be transparent for tax purposes. In fact, income attributable to a trust is not charged to tax in the hands of the trustee if distributed to a beneficiary. Likewise, beneficiaries of a trust not resident in Malta and all the income attributable to a trust not arising in Malta are not liable to any taxes. Other laws and regulations may have an impact on the taxation of trusts and trustees. Malta is also a signatory to a number of Double Tax Treaties that may apply in the circumstances.
Mifsud & Mifsud Advocates is actively involved in providing Trust law advice to its local and international clients in different economic sectors.