Although the English law concept of trust was already present in Malta since the late 1980s through the concept of ‘offshore trusts’, the first written legislation regulating domestic Maltese trusts came into force in 2004 through the enactment of the Trusts and Trustees Act (“TTA”) (Chapter 331 of the Laws of Malta).
A trust is defined as existing as per Article 3 of the TTA:
“a person (called a trustee) holds, as owner or has vested in him property under an obligation to deal with that property for the benefit of persons (called the beneficiaries), whether or not yet ascertained or in existence, which is not for the benefit only of the trustee, or for a charitable purpose, or for both such benefit and purpose aforesaid”.
From this definition, it is gathered that a trust involves as a minimum, a tripartite relationship involving:
- A Settlor, defined in Article 2 of the TTA as the person who creates the trust, including the person who provides trust property or makes a disposition on trust or to a trust. A settlor can be either a natural or a legal person, or even another trust. What is important is that the settlor creating the trust must have legal capacity to settle property;
- A Trustee, also defined in Article 2 of the TTA, is the person who holds the property under the obligation to deal with the said property for the benefit of the beneficiary. The trustee can also be either a natural or a legal person who would be typically licensed by the Malta Financial Services Authority to act as such; and
- A Beneficiary is the person entitled to benefit under a trust, or in whose favour a discretion to distribute property held in the trust may be exercised. There is no trust without at least one beneficiary, therefore the latter must be clearly identifiable. Should there be no beneficiary, the trust would be invalid.
A trust is established through what is generally referred to as a trust deed. Included under this deed, there must be indicated the person who must administer the trust (the trustee) and the person or persons who will benefit from the trust (the beneficiary). The trust fund, that is the initial property, can constitute both movables and immovables.
There are differing reasons behind the motivation to establish a trust, normally ranging from tax and practical purposes. For instance, a trust could be created to preserve minors’ assets until they attain the age of majority, benefit from estate tax deductions, and to provide certain benefits to a charity.
Feel free to contact us should you require any assistance or additional information on the creation of Trusts in Malta.