The Malta Financial Services Authority (MFSA) is responsible for the authorisation, regulation and supervision of Maltese trustees. The MFSA also licenses, regulates and supervises banking and financial institutions, and investment services business.
The setting up of trusts in Malta is regulated by the Trusts and Trustees Act (hereinafter referred to as ‘the Act’). The Act provides for the creation of trusts and authorisation and supervision of trustees. In this regard, the MFSA is the competent authority for the purposes of the Act. The Act incorporates within its provisions the Hague Convention on the Law Applicable to Trusts and on their Recognition which Malta has ratified.
What is a Trust?
A trust is an obligation which binds 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.
How the Trust is created?
A trust can come into existence in any manner.
A trust may come into existence by an instrument in writing including by a will. A unilateral declaration of trust is also possible. A unilateral declaration of trust is a declaration in writing made by a trustee stating that it is the trustee of a trust, containing all terms of the trust as well as the names or information enabling the identification of all beneficiaries.
A trust may also come into existence by oral declaration, with the exception of a unit trust which must be created by a written instrument. Also in the case of an inter vivos trust, the trust must be created by notarial trust deed. A trust may also come into existence by operation of law or by a judicial decision.
Where assets are held, acquired or received by a person for another on the basis of oral arrangements of a fiduciary nature, express or implied, there shall be presumed to be mandate or a deposit rather than a trust, unless there is evidence of the intention to create an oral trust. A trust may continue until the 100th anniversary of the date on which it came into existence, and, unless sooner terminated, shall terminate. This limit does not apply to a trust for a charitable purpose or to a unit trust.
What are the effects and legal formalities of a Trust?
The effects of any transactions related to property under trust are regulated by the Act and other laws that apply specifically to trusts. The formalities required with respect to such transactions are as a general rule regulated in the normal manner. Transactions relating to the transfer of ownership or other rights to or in property under trust shall therefore be carried out in the form and manner required by the law applicable to such transactions.
What are the main characteristics of a Trust?
The settlor is the person placing the assets in the trust. This includes a person who provides trust property or makes a disposition on trust or to a trust. Once a trust has been created, the settlor ceases to have any active role in the trust.
‘The Trustee’ or ‘Corporate Trustee’
The trustee is the person or persons holding or in whom the property is vested on trust for the beneficiaries. Trustees are usually appointed by, or as provided in, the trust instrument and in such number as may be so provided. A trustee may be a natural person provided he is of full age and legal capacity and not under any legal impediment to so act. A trustee may also be a juridical person the objects of which include acting as trustee. A corporate trustee can be defined as a trustee which is any legal person wherever incorporated.
The beneficiary is the person entitled to benefit under the trust or in whose favour discretion to distribute property held in trust may be exercised. The rights of the beneficiary are personal to him. Thus a person shall not be entitled to benefit under a trust unless he is either identifiable by name, or ascertainable by reference to a class or to a relationship to some person. If there are no beneficiaries identifiable or ascertainable, the trust shall, unless the purpose is a charitable one, fail.
The terms of the trust may provide for the office of protector of the trust. Normally the powers of the protector cover matters such as the appointment of a new or additional trustee, the removal of a trustee and obtaining information as to the way in which trustees are managing the trust. In the exercise of his office, the protector shall not be deemed to be a trustee.
‘The Trust Deed’
The trust instrument is the instrument whereby the trust is created and includes any instrument varying the terms of the trust and also a unilateral declaration of trust.