5 Benefits of Setting Up a Trust you may not know

A family trust is a specific form of trust that shelters your assets and enables you to create a family legacy that can be preserved for generations to come. Assets placed into a family trust are secure and enjoy a range of fiscal and other benefits.

The trust comprises three parties: the settlor, trustee, and beneficiaries. The settlor is the individual who creates the trust and places their assets in it. The trustee is the entity or individual that manages the trust and its assets on behalf of the beneficiary. The beneficiary can be one person, a group, or an entity that will benefit from the trust. In the case of a family trust in Malta, the beneficiary would be family members such as descendants or ascendants or a spouse. Trusts are usually set up to preserve wealth and assets for the benefit of future descendants once the settlor has passed away, or the beneficiary(ies) reach a certain age.

In Malta, trusts are regulated by the Trusts and Trustees Act and the Malta Financial Services Authority. This means you need professional assistance in setting up the trust, and the trustee needs to be a licensed entity or individual, approved by the authorities.

If you are exploring ways to provide for your family in the near or distant future, here are some little-known benefits of a family trust for your consideration.

Protection against mismanagement of wealth

Creating a family trust means that professionals will assist in the management and administration of your assets. This reduces the risk of wealth mismanagement both now and in the future. Your assets will be safe and protected from any external influence and are not at risk of being sold, seized, transferred, or anything else that goes against your wishes. The trustee is licensed by Maltese authorities and is therefore trustworthy and reliable when it comes to managing your legacy.

Income distribution

Another benefit of a family trust in Malta is the efficient income distribution. When the trust is created, you can lay down the conditions under which the assets are distributed. This could be once a certain event takes place or when the trust period comes to an end. For example, the beneficiaries could gain access to the trust once they reach a certain age, e.g. 18 or 21. The use of trust also means that assets will be distributed to the beneficiary or heirs at a certain time, not at the exact moment the grantor passes away. Creating a trust makes the distribution of income and assets smooth, straightforward and orderly, and as it is done by a third party this reduces the risk of any disputes or unnecessary delays arising.

Trust tax benefits

When you opt for a family trust in Malta, you can enjoy a range of fiscal benefits. These include minimising estate taxes once you pass away. While there is no inheritance tax for Maltese citizens, duties are payable on property transfer through inheritance or donation. By placing property in a family trust, you can reduce this. Additionally, if you are not a Maltese citizen, having a Malta family trust could help reduce the fiscal burden on your family members when the time comes. The trust allows you to not only potentially reduce the amount of tax or duty due, but it will enable you to defer taxable events or transfer the tax burden onto a beneficiary who enjoys a lighter tax liability. Taxation is complicated, but if this is one of your concerns, CSB Group is more than happy to provide more information on your specific situation.

Trusts can help during illness or disability – not just death

The purpose of a family trust in Malta is not just to manage the distribution of assets after the settlor passes away. They can also be used in cases of illness and disability. For example, if you could be incapacitated for some time, a trust can safely manage your assets for the duration. This could include business interests, money, art, property, and company shares. Should something go wrong, you can rest assured they will be passed on to the beneficiary exactly when and how you wish.

Avoid court process

Sadly, when it comes to wills and succession planning measures, sometimes the matter can end up in court. This entails years of hearings, significant fees, and a delay in distributing the assets to the beneficiary. A family trust can help avoid all of these potential issues. The trust is administered by a third party who is regulated and bound to follow the specific instructions laid down by you. Placing your assets and investments in a family trust can also protect your descendants from having to deal with creditors or other potential claimants on your estate.

For further information or any assistance required in setting up a Family Trust or Security Trust, contact one of our professionals on [email protected].