Family trusts are created to hold property settled by the settlor for the present and future needs of family members or family dependents who are definite and ascertainable.
Malta is said to be a very practical location for setting up a family trust, owing to its pleasant Mediterranean climate, excellent quality of life and highly competitive cost of living which attract a vast number of foreign residents. In practice, the individual wishing to create the “family trust” (i.e. the settlor) sets up a company, which will act as trustee of the family estate transferred to it under trust, for the benefit of the family members.
By virtue of Act No.XI of 25 April 2014, a number of amendments to the Trusts and Trustees Act were brought into force. The concept of family trusts was in fact introduced into the Maltese trust regulatory framework in article 43B. This regime was specifically created for companies acting as trustees for family trusts, as defined in the Trusts and Trustees Act and in these rules, to mirror the private trustee regime applicable to individuals under the same Act.
Trustee companies which satisfy the requirements set out in Article 43B are not required to obtain authorisation, although they are subject to a registration requirement. Article 52 was also amended, empowering the Authority to issue rules to regulate trustees which are subject to a registration procedure in terms of Article 43B. Upon being registered, such trustee is only permitted to act as a trustee in relation to a specific settlor or settlors of family trusts and in any case for not more than five settlors at a time. He/She may only provide administrative services in respect of a specific family trust or trusts.
The MFSA has welcomed the respondents’ comments on the interposition of a professional trustee on the board of directors of the corporate trustee and it will not require trustees of family trusts to include a professional trustee on their board of directors. Nonetheless, all proposed directors, who must be individuals, shall be required to undergo a fit and proper assessment as defined in the Rules, and at least one of these directors, is required to have knowledge and experience in relation to the administration of trusts.
There was also discussion with the FIAU in relation to the status of such trustee companies vis-à-vis Anti-Money Laundering and Financing of Terrorism requirements. The new rule which was introduced sets out a requirement for one of the directors or another senior officer of the company to assume the role of MLRO in terms of the Prevention of Money Laundering and Funding of Terrorism Regulations and the FIAU’s Implementing Procedures.
In addition, the definition of ‘family members’ and ‘family dependants’ has been slightly amended to reflect comments and feedback received from various respondents in this respect. This includes a broadening of the degrees of relation in the collateral line up to the fifth degree.