TRUST AND TRUSTEES (PROTECTED DISABILITY TRUSTS) REGULATIONS

SUBSIDIARY LEGISLATION 331.08

TRUST AND TRUSTEES (PROTECTED

DISABILITY TRUSTS) REGULATIONS

7th October, 2016

LEGAL NOTICE 324 of 2016.

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

(Protected Disability Trusts) Regulations.

(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

requires -

"the Act" means the Trusts and Trustees Act;

" th e Au th or it y ” s h a l l me a n the Malta F inancia l S ervic es

Authority established in terms of the Malta Financial Services

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

TRUSTS AND TRUSTEES

(PROTECTED DISABILITY TRUSTS)

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 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, 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

addition to the duties imposed on trustees under the Act and

without 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 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 a

conservative investment policy in dealing with trust assets,

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.