Trusts and Trustees Act

Suppliment tal-Gazzetta tal-Gvern ta’ Malta, Nru. 19,653, 7 ta’ Ottubru, 2016

L.N. 324 of 2016

TRUSTS AND TRUSTEES ACT

(CAP. 331)

Trusts and Trustees Act

(Protected Disability Trusts) Regulations, 2016

IN exercise of the powers conferred by article 57(1) of the

Trusts and Trustees Act, the Minister for Finance, acting on the

advice of the Malta Financial Services Authority, has made the

following regulations:-

(1) The title of these regulations is the Trusts and Citation and

scope.

Trustees Act (Protected Disability Trusts) Regulations, 2016.

(2) The purpose of these regulations is to regulate the

establishment and administration of trusts formed for the benefit of

beneficiaries at least one of whom is a person with disability, where

the said person is entitled to benefit under the trust in a manner which

is either exclusive or in the manner set out in regulation 6.

(3) Unless otherwise provided, the provisions of the Act shall

apply to Protected Disability Trusts and to the trustees thereof, and in

cases of conflict between the provisions of these regulations and the

provisions of the Act, the provisions of these regulations shall prevail.

(4) The provisions of the Act and these regulations shall apply

notwithstanding anything to the contrary contained in the trust

instrument or in any other agreement between the settlor and the

trustee.

(1)

In these regulations, unless the context otherwise Interpretation.

requires -

"the Act" means the Trusts and Trustees Act;

"the Authority” shall mean the Malta Financial Services

Authority established in terms of the Malta Financial Services Cap. 330.

Authority Act;

"family member", in relation to an individual, includes -

(a)

the parents;

(b)

the spouse;

(c)

a partner in civil partnership;

(d)

a son, daughter, brother or sister aged eighteen years

or over;

(e)

uncle or aunt;

"parent" includes a step-parent and an adoptive parent;

"person with disability" shall mean

(a)

a person, being over compulsory school age, who,

by reason of injury, disease, congenital deformity or other

physical or mental incapacity, is substantially handicapped in

obtaining or keeping employment or in undertaking work on his

own account, of a kind which apart from that injury, disease,

deformity or incapacity would be suited to his age, experience

and qualifications;

(b) a qualified person with a disability as defined in the

Equal Opportunities (Persons with Disability) Act; or

(c)

a child certified to be suffering from physical and, or

mental disability by the Medical Panel responsible to establish

whether a child would be deemed eligible for a Disabled Child

Allowance under article 77 of the Social Security Act;

"Protected Disability Trust" means a trust which is established

in accordance with regulation 3 and which is notified to the Authority

in terms of these regulations;

(2) Words and expressions which are also used in the Act and

are not defined herein shall have the same meaning as in the Act.

(1)

A trust which -

(a)

is set up by a family member of the person with

disability under the terms of these regulations; and

(b) is for the benefit of a beneficiary who is a person

with disability, where the said person is entitled to benefit under

the trust in a manner which is either exclusive or in the manner

set out in regulation 6; and

(c)

is notified to the Authority in accordance with

regulation 8(2),

shall qualify as a Protected Disability Trust for the purposes of these

regulations.

(2) The purpose of a Protected Disability Trust and the

beneficial interest of the person with disability shall be specified

clearly and in writing in the trust instrument.

(3) In the event of the demise of the beneficiary who is a

person with disability, the trust shall be terminated in terms of article

17 of the Act.

(1) A trust set up under the terms of these regulations The trustee.

shall have as its trustee either of the following, and such trustee shall

not also be a beneficiary under the same trust

(a)

a professional trustee authorised to act as trustee

under article 43 of the Act and who is either acting without

being remunerated or, if such professional trustee receives or is

entitled to receive remuneration, any such fee shall be fixed and

agreed upon with the settlor, clearly set out in the trust

instrument and shall satisfy the conditions listed in regulation 5;

or

(b)

a private trustee in terms of article 43A of the Act.

(2) In the case that the trustee is a private trustee under sub-

regulation (1)(b), the following conditions shall be satisfied

(a)

the private trustee so appointed shall have no

beneficial or any other interest in the trust assets;

(b) although such trustee would not be a trustee duly

authorised to so act in terms of article 43 of the Act, such trustee

shall have to adhere to any applicable law that is already or may

become so applicable or to any rules or regulations applicable to

trustees as established by article 1(2) of the Act;

(c)

a professional trustee as described in sub-regulation

(1)(a) shall be appointed co-trustee by the settlor and, in the

event of the latter’s death, by the protector, and such co-trustees

shall act jointly in the performance of their duties and the

exercise of their powers and discretions;

(d) the person so appointed to act as private trustee

shall, within one year of being so appointed, undergo adequate

training regarding the institute of trust and the legal obligations

and powers of the trustee in order that such trustee may execute

his duties in adherence to the law and regulations and as a bonus

pater familias.

(3) The trustee of a trust set up under these regulations shall

not be appointed or shall not continue to act as trustee should any

circumstance that gives rise to a conflict of interest as defined in

article 2 of the Act arise.

(1) In the event that the professional trustee so

appointed receives or is entitled to receive remuneration, the

applicable fee shall be agreed upon with the settlor and clearly set out

in the trust instrument, and shall not exceed the amount of four

hundred euro (€400) per year, or such other amount, which may

reflect changes in the cost of living or in the value of currencies, as

may be prescribed in a Notice prescribed by the Minister.

(2) Any fee imposed by the professional trustee in terms of

sub-regulation (1) shall be fixed for a period of three years, and, in

any case, any increase shall be proportionate to the increase in the

index of inflation.

(3) The limit on the amount of remuneration which may be

imposed by the professional trustee as set out in sub-regulation (1)

shall only apply in cases where the initial and additional settlements

to a Protected Disability Trust do not cumulatively exceed the value

of four hundred and fifty thousand euro (€450,000)

Provided that any increase in value of the trust assets, after

such settlement to the trust, shall not affect the application or

otherwise of this sub-regulation.

(1) Beneficiaries of a trust set up in terms of these

regulations shall include at least one person with disability as defined

in regulation 2. The terms of trust shall provide that

(a)

the person with disability benefits exclusively from

the trust assets; or

(b) the parents of the person with disability be the

preferred beneficiary during their lifetime, and following their

demise the person with disability shall be the sole beneficiary

under the trust.

(2) During the lifetime of the person with disability, the trustee

shall act and administer the trust assets in the paramount interest of

such person with disability, and where the trust assets include

immovable property which constitutes the primary place of residence

of the person with disability, such immovable property shall not be

disposed of while the person with disability is still alive, except with

the prior written consent of the protector together with confirmation

from the Court that such disposal is in the interest of such person with

disability.

(1) When setting up a trust in terms of these regulations, The protector.

a protector having the powers established by article 24A of the Act

shall be appointed in all cases, and the protector’s powers shall be

exercisable and come into effect not later than the date when the

disabled person becomes the sole beneficiary.

(2) The person so appointed shall have no actual or potential

interest in the present trust assets or any assets that may be settled on

trust at any time in the future.

(3) The protector of a trust set up under these regulations shall

not be appointed or continue to act as a protector should any

circumstance that gives rise to a conflict of interest as defined in

article 2 of the Act arise

Provided that in the case where more than one protector is

appointed, it shall be sufficient that at least one of the protectors so

appointed continues to comply with the requirements of this sub-

regulation.

(4) Where the protector exercises his power to remove a

trustee in terms of article 24A of the Act, such removal shall have no

effect if it would result in there being no trustee unless, before the

removal takes effect, a new trustee is appointed or an application is

made to the court for the appointment of a new trustee

Provided further that a trustee ceasing to be a trustee shall

also be responsible to fulfil the obligations set out in article 20(4) of

the Act.

(5) The trustee shall obtain the consent of the protector in the

following cases

(a)

prior to the resignation of the trustee and, or co-

trustee; and

(b) subject to the provisions of regulation 6(2), prior to

the transfer of assets from the trust

Provided that the protector shall not give his consent to the

transfer of transfer of assets in terms of this sub-regulation unless

such transfer is justifiable and will effectively be in the best interests

of the person with disability

Provided further that in case of uncertainty as to whether

such transfer is in the best interests of the person with disability, the

protector, trustee or any other person having a lawful interest may

apply to the Court for directions, and the Court shall not approve any

such transfer unless it is satisfied that such transfer is justifiable as

being in the best interests of the person with disability.

(6) The protector appointed in terms of these regulations shall

always be consulted in the following circumstances

(a)

before the trustee exercises discretions and takes

decisions relating to distribution of income or capital;

(b) before the trustee takes decisions relating to the

medical and educational needs and the care of the person with

disability.

(1) The professional trustee shall have the duty to duly

notify the Authority by means of the form prescribed by the

Authority, and to provide any other information that the Authority

may request from time to time.

(2) The notification referred to in sub-regulation (1) shall

include all the details of the trust, including the following

(a)

name of the trust, which shall include the

designation ‘Protected Disability Trust’;

(b)

identification details of the trustee;

(c)

identification

details

of

the

co-trustee

(if

applicable);

(d) identification

details

of

the

beneficiary

or

beneficiaries;

(e)

identification details of the settlor;

(f)

identification details of the protector;

(g) a complete and detailed declaration regarding the

nature and value of assets held on trust;

(h)

a copy of the signed trust instrument establishing the

trust;

(i)

a medical certificate or equivalent document

evidencing the disability of the beneficiary.

(3) The trustee shall also notify the Authority in the event that

he resigns, has his engagement terminated or is otherwise hindered in

performing his duties hereunder, and must also notify the Authority of

the identity of the trustee who would consequently be appointed in his

stead.

(1) A trustee appointed under these regulations shall, in Obligations of

addition to the duties imposed on trustees under the Act and without trustee.

prejudice to any other duties set out in the trust instrument, have the

following duties

(a)

open and maintain bank accounts in the name of the

trustee and by reference to the name of the trust, for holding

cash relating to the trust, and the trustee shall not be allowed to

make use of clients’ accounts in relation to trusts set up in terms

of these regulations;

(b) seek to generate income from assets held on trust by

investing monies in accordance with the criteria set out in

regulation 11, or leasing property when deemed to be in the

interest of the person with disability.

(2) In the case where any one of the beneficiaries of a trust set

up in terms of these regulations is subject to guardianship as defined

in Title VI of the Civil Code, or curatorship, the trustee shall, as the Cap. 16.

case may be and in the event of any possibility of a situation of

conflict of interest, seek directions from the Court in the execution of

his duties and shall be obliged to comply with any directions so given

by the Court.

(1) A trustee appointed under these regulations shall adopt Investment

a conservative investment policy in dealing with trust assets, parameters.

including investment portfolios as well as individual securities that

may form part of the trust assets, and shall maintain a balance

between the generation of income and the preservation of capital,

while generating sufficient proceeds to meet the expenditure

requirements of the beneficiaries in accordance with the provisions of

the trust instrument.

(2) No part of the trust assets shall be entered into leverage

arrangements or utilised for the purchase of securities on margin or

geared in any way through the use of financial derivative instruments,

either directly or on a see-through basis.

(3) A trust set up in terms of these regulations shall comply

with the prudential investment restrictions outlined below

(a)

If any of the trust assets are invested, these shall be

predominantly invested in regulated markets.

(b) The trustee shall not invest more than ten per cent of

the trust assets in securities which are not traded in or dealt on a

market which

(i) is regulated, operates regularly, is recognised

and is open to the public;

(ii) has adequate liquidity and adequate

arrangements in respect of the transmission of income and

capital.

(c)

The trust assets invested shall be properly

diversified in such a way as to avoid excessive exposure to any

particular asset, issuer or group of undertakings. In any case, a

trustee shall not invest more than ten per cent of trust assets in

securities issued by the same entity.

(d) No more than fifty per cent of the trust property

shall be kept on deposit with any one body.

(e)

The trustee in his capacity as trustee of a Protected

Disability Trust shall not grant loans or act as guarantor for any

person other than the settlors or the person with disability.

(1) Without prejudice to the provisions of article 20 of

the Act, in the event of the resignation of a trustee, the trustee shall

declare his intention and give notice as stipulated in article 20 of the

Act to resign while allowing for a notice period of not less than three

months.

(2) The resignation of the trustee shall not have effect unless

the consent of the protector is obtained in terms of regulation 7(5) and

such resignation is notified to the Authority in terms of regulation 8.

The Authority may issue rules in terms of article 52 of the

Act, for the better carrying out and to better implement the provisions

of these regulations.

€0.36