Asset Protection Trust from a Maltese Law Perspective

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Asset protection is a legal and financial strategy designed to safeguard your assets from potential risks, such as lawsuits, creditors, bankruptcy, and other threats. The goal of asset protection is to shield your wealth and property from being seized or accessed by claimants or creditors while still ensuring that your financial affairs are conducted within the boundaries of the law. A trust arrangement is a form of asset protection.

Asset Protection Trust

The Trust and Trustees Act, Chapter 331 of Malta's Laws, governs the establishment of trusts and designates the Malta Financial Services Authority (MFSA) as the overseeing body responsible for regulation. According to Maltese Law, a trust is defined as a legal arrangement where the settlor transfers ownership of their assets to a trustee for the benefit of beneficiaries.

Trustees are legally obliged to act solely in the best interests of the beneficiaries or the specified purpose in the case of charitable trusts.

To begin, it's essential to understand the reasons for establishing a trust and the associated advantages. Trusts serve various purposes, including:

  • Passing assets to future generations.
  • Streamlining legal processes, tax matters, and probate when transferring assets.
  • Safeguarding assets during adverse political events.
  • Managing and distributing assets during the settlor's lifetime and after their passing.
  • Allocating income and capital for specific needs, like emergencies.
  • Creating dedicated funds for minors or individuals with disabilities.
  • Serving as an alternative to a will.
  • Strategically managing tax exposure by entrusting a portion of assets to a trustee.
  • Shielding assets as part of a risk management strategy.

Fundamentally, a trust arrangement imposes fiduciary responsibilities on the trustee.

Trust property constitutes a distinct fund owned by the trustee, separate from the trustee's personal assets and other assets held in different trusts. This has several legal implications:

  • Personal creditors of the trustee cannot access trust property.
  • Trust property is not part of the trustee's personal estate in case of insolvency or bankruptcy.
  • Trust property is not considered marital property or part of the trustee's estate upon their demise.

Another benefit of establishing a trust is the concept of continuity. By law, a trust can last up to 125 years, and it doesn't depend on the settlor's existence for the trustee to carry out their duties as initially outlined in the trust deed.

In the context of security trusts, this arrangement is employed to hold assets or guarantees as collateral for a debtor to one or multiple creditors, such as in a bond issue. The security can take various forms, including movable or immovable property, like hypothecs, pledges, undertakings, or any property transferred to the Security Trustee with defined rights as specified in the relevant Security Trust instrument.

CSB Trustees & Fiduciaries Ltd has played a central role in numerous commercial transactions involving security trusteeship. They have acted as a security trustee in transactions related to the issuance of securities, whether publicly or privately, as well as in portfolio management and the custody of investment instruments. Additionally, the company has often been appointed as a security trustee in securitization transactions to segregate assets of Special Purpose Vehicles (SPVs) from the originator and creditors, thereby reducing the risk of asset consolidation in bankruptcy proceedings.

Key Contacts

Franklin Cachia

Director - Tax & Regulated Industries

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Francesca Anastasi

Legal Advisor

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We offer the following related services.

Testimonial

We at MIDI plc have engaged the services of CSB Group on a trusteeship basis to serve a fundamental role in our secured bond issue. Their team has always been accommodating, well-prepared and have always ensured that our requirements are met in a most timely and efficient fashion. Their services have indeed exceeded our expectations. CSB Group were identified due to their knowledge and expertise in fiduciary obligations, amongst other qualities.

MIDI PLC

We have been using the services of CSB Group in their remit as security trustees for our recent bond issue. We have found CSB to be highly efficient and effective in their work. We will not hesitate to use their services in the future and would recommend them to any of our clients and partners seeking similar services.

Mercury Towers

Tum Finance plc engaged CSB Trustees & Fiduciaries Limited to be the Security Trustee for a bond we recently issued. We have closely worked with a team of professionals and are pleased to give our testimonial in this regard. For sure we will request their services in the future. We definitely recommend CSB Trustees & Fiduciaries Limited to be the team that will be always there when you need them for the best advice and satisfaction. You made it so simple Thank you!

Tum Finance plc

We have appointed CSB Trustees & Fiduciaries Limited to be the Security Trustee for a bond issued by our company; Stivala Group Finance p.l.c. The team that we worked closely with, was efficient, reliable, and knowledgeable and we couldn’t be more satisfied with the service provided. The team always made itself available even when provided with a short notice. We are glad we have engaged their services and we would definitely recommend them.

Stivala Group Finance p.l.c.

Back in 2015 CSB Trustees & Fiduciaries Limited has been entrusted with the project to set up a security trust for us. Their knowledge and experience within the sector made this project easier for us all. The team is meticulous, attentive and always available whenever assistance is required from our end. We would definitely recommend them for their stellar service.

Mr. Borg

Manager

Malta Properties Company Plc

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