Although the trust concept is not generally found in countries like Malta whose legal system is based on civil law, as part of Malta’s development as an international finance centre, Malta does in fact have a codified trust law entitled the Trusts Act, 1988. Moreover upon the subsequent enactment of the Recognition of Trusts Act, 1994, Malta ratified the convention of the law applicable to trusts that was adopted by the Hague Conference on Private International Law.

Trust framework
Malta's 1989 Trust Legislation is modelled on the Trust Law of JERSEY (Channel Islands), whereby the trust separates 1) legal ownership, 2) Asset Administration and 3) Beneficiaries. A trust exists where a person called a trustee holds or has vested in him, property under an obligation to deal with that property for the benefit of persons (called the beneficiaries), whether or not yet ascertained or in existence or for a purpose which is not for the benefit of the trustee, or for both such benefit and purpose aforesaid. (Section 3(1) of the Trusts Act – Cap. 331 of the Laws of Malta.

Though not a legal person, the trust is in fact and in law: a “contractual holding of assets” represented by a licensed Maltese trustee, bound to exercise discretion in full accordance with the terms and mechanism established at the outset, and always to favor the overriding interest of the beneficiaries. Unless specifically prohibited by the trust Deed, beneficiaries may be changed but must always be identifiable, be they the primary or an additional beneficiary. The Deed containing the trust provisions and beneficiary details, is submitted to the Malta Financial Services Authority, which functions as the primary guardian of the Maltese trust, as set out in the original documents, and any subsequently amendments, providing an additional safeguard of the trust’s constitution and rules. Although the Deed can provide for a change in beneficiaries, and a PROTECTOR can be given the right to substitute trustees, or veto their decisions, nevertheless no changes in the deed are valid unless registered with the MFSA. Naturally a Trustee is bound to keep accurate and up-to-date accounts of all trust incomes and property and as a rule all trust documents and resolutions are notarized.

It is noteworthy that Maltese law attributes no other liabilities to the Settlor other than those of clarity of intention, and legal capacity to transfer. Ultimately it is the Trustees who assume personal liability upon valid transfer of any property into the trust, hence the importance of rigorous due diligence procedures. Given the fact that legal action can only be validly taken by the beneficiaries of the trust, and only against the trustees, it is wise for a prospective Settlor to factor in the personal circumstances surrounding the incomes and property in question, and match these to personal and family developments making allowance for flexibility so that trustees will be able to implement the substance of the client’s personal wishes, and not be unnecessarily restricted by the Deed’s form to the detriment of beneficries.