Update on Family Trusts and Private Trust Companies
13 April 2017
A recent amendment to Malta’s Trust and Trustees Act has seen the introduction of Family Trusts and Private Trust Companies. The main aim of this development is to provide a better way in which wealthy families can control and manage their wealth whilst still ensuring that their assets are protected from claims or creditors.
A ‘family trust’ is defined as a trust created to hold property settled by the settlor or settlors for the present and future needs of family members and family dependents. These trusts can in Malta, as in other jurisdictions such as Jersey and Gibraltar, now be managed and administered by Private Trust Companies ('PTC').
A PTC is a privately owned corporate trustee that is often the vehicle of choice to act as a trustee of a trust or a number of trusts holding the assets of the very wealthy. Establishing a PTC is often considered to be an integral part of the private wealth structuring process for those seeking to establish a dynasty of private wealth. The corporation itself may be registered in any jurisdiction that allows it, with Malta now joining the list of possible options! The board of directors is often constituted by family members, trusted advisors of the family and professionals working in the jurisdiction of incorporation of the PTC.
The sole purpose of the PTC must be to provide trust company business services in respect of one or more trusts. If there are multiple trusts it would be expected that they are all linked to the same family
Unlike professional Trustees, a PTC does not require authorisation by the Malta Financial Services Authority and the settlor and/or his trusted advisors can be involved as directors of this company.
The key conditions that need to be satisfied by the PTC are the following:
- It needs to register with the MFSA;
- It needs to be managed by at least 3 individual directors;
- One of the directors must be a local individual experienced in Trust law/administration and should already be approved by the MFSA;
- It should be in a position to appoint a Money Laundering Reporting Officer;
- It should maintain a minimum level of professional indemnity insurance cover at all times.
The ownership of a PTC at its simplest is for the client or members of the client's family to own the shares in their personal names. This is however unattractive to many clients as it may cause issues with taxation, confidentiality and heirship.
An alternative therefore is to arrange for the shares of the PTC to be held upon the terms of a charitable or non-charitable purpose trust. If a non-charitable purpose trust is used the client would have the benefit of appointing an enforcer who is commonly a trusted professional family adviser.
Alternatively an orphan ownership structure could be achieved by using a Jersey foundation to hold the shares in the PTC.
Another advantage of using the trustee of a charitable trust or non-charitable purpose trust as the shareholder is that the client has the comfort of knowing that the ownership of the PTC need not change for an indefinite period. This is particularly attractive to those clients with dynastic ambitions for family wealth.
If you are interested in learning more about how a Private Trust Company might be of benefit please contact: Phill Evans on 00 44 1534 886100 or via email email@example.com