What is a Trust?
The Gibraltar trust is a great structure to protect your family assets and preserve your family wealth. A trust is a fiduciary relationship between two parties. One of the parties (the trustor) consents to the other party (a trustee), the right of a particular asset or property for the welfare of a third party, i.e. the beneficiary. Trusts give legal protection to the assets of the trustor. Trust also helps specify the method of distributing money to a person during his life or after his death. Moreover, they also help in avoiding taxes.
Gibraltar Trusts and relevant law
Gibraltar is a common-law jurisdiction and it recognizes the concept of a trust as a legal construct by standards by which high net-worth individuals and their families can structure their tax and succession plans.
Gibraltar recognizes and gives full legal effect to the concept of a trust and is at the lead of global best practices in the area of trusts.
The main trust legislation in Gibraltar is the Trustee Act 1895, which is primarily based on the English Trustee Act 1893, with the following amendments incorporating parts of the English Trustee Act 1925 and the English Trustees Investment Act 1961.
The Trustees Act sets out statutory duties and powers of trustees, jointly with trustees’ powers of investments and the powers of the courts.
Trust Form and Uses
- Uses of trusts in Gibraltar
The lack of strict formal requirements for the creation and operation, and the tremendous flexibility of trust instruments, are what make trusts uniquely useful for estate and succession planning.
Gibraltar trusts have been utilized as a structuring vehicle for wealth and tax planning for as long as Gibraltar has been employed as a center for financial services, with families formulating tax and succession plans and incorporating the wide range of solutions available.
Trusts offer great advantages, especially for:
- Individuals who are changing, or planning to change, their residence or citizenship
- Individuals with families that are residents abroad
- Individuals wanting asset protection
Common forms of trust include the following:
Discretionary trust
This is the most popular form of trust used in Gibraltar. The trustee has a preference to exercise his own judgment as to the manner and amount by which beneficiaries of the trust might benefit from the trust assets.
Life Interest & Interest in Possession Trusts
Under this form of trust, a beneficiary’s entitlement can be restricted to the right to receive trust income or occupy trust property, so that the underlying trust capital is conserved within the trust.
Settlor Interested Trusts
This is a form of trust in which the settlor of a trust, spouse, or civil partner is also a beneficiary of the trust.
Accumulation & Maintenance Trusts
Under this form, Income that is earned by the assets of the trust may be amassed and added to the capital of the trust.
Why Establish a Trust in Gibraltar?
The trust is a flexible instrument that can be modified to meet a Settlor’s particular requirements and may provide the following advantages:
- Absence of payment of all taxes
- Conservation and administration of assets for family and future generations.
- There are no restrictions on the choice of currency for trust assets.
- No need for probate which facilitates the distribution of assets to family members.
- Reporting on the activities of the trust is not mandated.
- Avoidance of inheritance taxes or estate duties which may contrarily be payable.
Gibraltar Trusts tax regime
If a Trust is created by a non-resident of Gibraltar for the benefit of non-resident beneficiaries, such trusts are exempt from all taxes in Gibraltar.
So no stamp duty is payable on the transfer of assets held by a trust except in the case of immovable property positioned in Gibraltar.
And no gift or wealth taxes are payable, and there are no capital gains taxes in Gibraltar.
Registration and Privacy of Gibraltar trust
The Registered Trust Act 1999 gives a facility for the registration, of a trust deed in Gibraltar. The trust deed is simply approved with the date of registration and returned, and no copy is retained (Gibraltar Trusts need not be registered and accordingly remain classified).
The register will comprise the following:
- 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.
Note that the initial structuring of trust needs care, skill, and experience., so in this case, a professional is highly recommended.
To create a Trust for the preservation of your assets in Gibraltar, let’s go ahead and contact your Damalion expert now.
