Many families employ trusts as part of their international family asset protection and tax planning. Similarly, in the corporate environment many companies employ trusts for purposes such as leadership succession planning. Generally, when establishing a trust it is normal practice for the settlor(s) to utilise a professional trust company as the trustee. There are good reasons for this, as it ensures the trustees are professionals with the appropriate expertise to administer the trust and guide the involved parties appropriately. It does, however, mean the settlor is essentially relinquishing all control of the assets transferred to the trust, and therein lies a problem for many would-be settlors.
Well, there is another way.
Private Trust Companies
Whilst retaining a professional Trustee is an ideal way to proceed for many settlors, certain jurisdictions including Malta have made it possible for settlors and their families to retain control of any assets held under trust through the introduction of the new Private Trust Company (PTC). It is somewhat of a simplification, but in effect this provides the benefits of a trust without the perceived risks of trusting!
A PTC is a Limited Liability Company, incorporated for the sole purpose of acting as trustee in relation to a specific trust or trusts. Its activities would therefore be limited to acting as trustee in relation to a specific settlor and their trusts. Such companies do not provide trust services generally, must not solicit business from the public at large, and would not be able to act as a trustee in relation to more than five settlors at a time. Like any other company, a PTC is run by its board of directors which is often made up of the settlors, certain beneficiaries to the trust, and their trusted advisors. This group would make the trustee decisions. A PTC is exempt from the requirement to be licensed and is solely required to register with the Malta Financial Services Authority and hence is still required to engage a licensed trust company in Malta to carry out trust administration services.
The potential advantages of this sort of PTC arrangement include:
- Settlor(s) and their families retain control of their assets whilst alive
- Quick and informed decisions making
- Family issues are dealt with more freely
- Speed and flexibility when dealing with trust assets
- Changes in trust administrators are quicker and easier
- Exempt from licensing requirements
Malta PTCs are considered to be an attractive option to incorporate within a family estate plan to provide for administration of Malta family trusts, due to the simple and quick process of registration as well as the certainty of the process, with rules published by the Malta Financial Services Authority.
For international wealth holders who might have a choice of several PTC jurisdictions, Malta also provides the benefits of:
- Full membership to the European Union
- A strong and thriving economy
- English-speaking country with a pro-business government
- A robust and current legal framework with legislation published in English
- High professional standards with a variety of service providers including accountants, bankers, lawyers, notaries and investment advisors with a high level of education and experience
- Multi-disciplined advisors able to adapt to the changing needs of high net worth individuals
- One of the only civil law jurisdictions to have successfully developed a trust concept by integrating it with Roman law sources
- Recognition of foreign trusts
- The fast and easy registration of trusts
For all of these reasons, I believe PTCs are going to be extremely popular in Malta as the market starts to realise their potential. As a company with deep trust administration expertise we are excited by the potential of these vehicles and we are actively discussing them with clients. If you are interested in how they might work for your own situation, please do get in touch.
If you are interested in private trust companies and other forms of wealth structuring, you may enjoy our comprehensive Guide to Structuring GCC Family Wealth. It covers trusts, foundations, and private trust companies in significant detail, along with case studies and comments on leading jurisdictions – including Malta.