Introduction of a Protected Trust

MEDIA ROOM

The legislator is creating a new set of regulations for the creation of trusts in favour of persons with disability. This set of regulations is devised with an added protection for the assets of the beneficiaries.

Referred to as the protected disability trust, this trust has to be set for the benefit of a person with disability, and by a family member of the person with disability. The distinction of this trust, shall be indicated in the trust instrument – an example of this would be by virtue of a provision within the trust deed.

As part of the process of the setting up of a trust, a protector shall be appointed and the powers of such a post shall come into effect not later than the date when the disabled person becomes the sole beneficiary.

The terms of trust shall provide that a person with disability shall benefit exclusively from the trust assets, however, an allowable derogation from this would be the parents of the person with disability being the preferred beneficiary during their lifetime, and following their demise, the person with disability then qualifying as the sole beneficiary under the trust.

An obligation is set on the trustee to act and administer the trust assets in the paramount interest of such person with disability.

The legislator ensures that added care is exerted in the management of such trust. This is indicative through the setting out of a conservative investment policy obligation upon the trustee when dealing with trust assets. Another indication is the requirement for a prudential investment restriction. This is if any of the trust assets are invested, these shall be predominantly invested in regulated markets and the trustee shall not invest more than 10% of the trust assets in securities which are not traded in or dealt on the market. On this note, a diversification of assets is required.

On this note, one must add that while the identification of such a class of trusts is new in our legislation, trusts as an instrument, were already being utilised for such a purpose. Through this regulation however, the legislator is now codifying provisions which seek to safeguard the position of the ultimate beneficiary.

Should you require further information in the set-up of trusts, kindly contact us on [email protected]