Families have been using trusts to preserve and manage their wealth for centuries. Unlike corporate vehicles, the lack of rigid formal requirements for the creation and operation of trusts, and the tremendous flexibility of trust instruments, make them uniquely useful for estate and succession planning.
Although many of the tax benefits that were associated with trusts have been eroded in recent years by anti-tax avoidance legislation, they still offer great advantages – particularly for:
- Individuals who are changing, or planning to change, their domicile, residence or citizenship
- Those with families that are resident abroad
- Those seeking asset protection
- Those whose principal motivation is not to avoid taxation but to dispose of their estate on death freely and without recourse to a lengthy and expensive probate procedure
Gibraltar recognises and gives full legal effect to the concept of a trust and Gibraltar is at the forefront of international best practice in the area of trusts. The Trustee Act, the main legislation governing trusts in Gibraltar, is based on the English Trustee Act 1893 and has been supplemented and updated by amending legislation.
Gibraltar was one of the first jurisdictions to introduce the regulation and supervision of trust companies. Professional trustees must be licensed under the Financial Services Act 1989 and are regulated by the Financial Services Commission (FSC). Sovereign Trust (Gibraltar) Limited is fully licensed to act as professional trustees in Gibraltar.
The Registered Trust Act 1999 provides a facility for the registration, if required, of a trust deed. The trust deed is simply endorsed with the date of registration and returned; no copy is retained. The register will contain only the name and date of creation of the trust, the amount of the initial settlement, the name of the trustee(s), a Gibraltar address for service and the date on which registration was made.
Gibraltar is also a highly favourable location for setting up asset protection trusts. This type of trust seeks to protect the assets of a settlor from such situations as political strife, forced repatriation, confiscatory taxes, exchange controls and the risks associated with litigation.
Gibraltar has sought to reduce the uncertainties that can arise when determining the legal propriety of transfers into a trust by shifting the focus to the objective test of solvency contained in the Insolvency Act 2011, Section 419A.
Under the provisions contained in the Bankruptcy (Register of Dispositions) Regulations 1990, an application may be made to register the trust by an approved trustee. The trustee must be able to demonstrate that due and sufficient enquiry was made to establish the propriety of the disposition and the solvency of the settlor at the time it was made.
It is vital that the trustee remains independent and exercises proper control over the trust property. A trust may be deemed to be invalid if the settlor continues to exercise power over the trust assets by retaining benefit or control, or by giving directions to the trustees. Sovereign Trust (Gibraltar) Limited has more than 30 years’ experience of forming and managing various types of trusts in Gibraltar.