Gibraltar lawyers are well versed in trust law being UK trained and qualified. Furthermore, the trust concept is fully recognised by the Gibraltar Supreme Court. If you are dissatisfied with the decision of the Supreme Court in Gibraltar, you may appeal to the Gibraltar Court of Appeal which is made up of UK judges which visit Gibraltar on a biannual basis. The final Court of Appeal is the Privy Council, effectively the House of Lords in England.
Appointment and regulation of trustees
Underlying international company
FAQ – Frequently Asked Questions
Why establish a Trust?
- Protection and administration of assets for family and future generations.
- No need for probate which simplifies the distribution of assets to family members.
- Minimising income and other taxes payable.
- Avoiding inheritance taxes or estate duties which may otherwise be payable.
- Avoiding forced heirship provisions whereby the Laws of a particular Country determine the inheritance of assets in a manner which may be contrary to the wishes of the client.
How does a Trust arise?
The Settlor and the trustee execute the trust document (or settlement as it is also known) which contains the first settlement usually 100 pounds or shares in an offshore company.
Assets such as property, marketable securities, and bank accounts would need to be conveyed, transferred or gifted to the trustees in accordance with the laws of the country in which the asset is situate. The trustees hold and manage those assets for the benefit of certain persons who are usually named in the trust and are known as beneficiaries.
Which are the advantages of a Gibraltar Trust?
- No stamp duty is payable on the transfer of assets.
- No capital gains tax, inheritance tax, gift, wealth or income taxes are payable in Gibraltar.
- Confidentiality both as to administration and distribution of assets.
- No requirements to file accounts nor to register a trust (other than an asset protection trust).
- The assets of such a trust can be held in any currency – there are no exchange controls.
Who is the settlor?
Letter of Wishes
Bankers, stockbrokers and investment advisers
General matters relating to Gibraltar Trusts
Gibraltar’s trust law is similar to the United Kingdom. The Trustee Ordinance is based on the Trustee Act of 1893 of the United Kingdom. Amendments have been made from time to time so that Gibraltar remains abreast of favourable changes which occur in the United Kingdom as regards trust law whilst at the same time ensuring Gibraltar’s attractiveness as a trust jurisdiction is maintained and where possible enhanced.
The Trustee Ordinance creates the framework. Whilst outlining the powers and duties of trustees, the investment of trust funds and the powers of the court, it is to the trust deed itself which one must look as on the whole the statutory framework is there to fill any voids which the trust deed may leave.
The perpetuity period is 100 years.
Variation of trusts and powers of investment
The UK Trustee Act of 1925 has not been implemented in Gibraltar however, certain amendments to our laws have been made so that trusts may now be varied and wider powers of investment made available to trustees.
Gibraltar’s trust law now allows the variation of trusts by applying the UK Variation of Trusts Act 1958.
Extensive investment powers similar to those contained in the UK Trustee Investment Act 1961 were introduced by the Trustee Investment Ordinance. The powers of delegation conferred on trustees by the UK Trustee Act 1925 and the Powers of Attorney Act 1971 are now contained within our Trustee Ordinance. Effectively, the Anglo-Saxon trust is fully embedded in Gibraltar’s laws.
Forms of trust
A variety of trusts can be established in Gibraltar, however, the most extensively used form of trust is the Discretionary Trust with the Settlor (usually the client) providing a Letter of Wishes to the trustees which may be varied from time to time.
Recognition of trusts
The Courts will apply the proper law of the trust to determine its nature and validity. The Trusts (Recognition) Ordinance applies the provision of the Hague Convention whereby a trust is governed by the chosen law of the settlor. Usually Gibraltar trustees, be they individuals or a trust corporation, are appointed and the trust specifically refers to the proper law of the trust as being Gibraltar law.
Emigration of trusts
Gibraltar trust law allows the trust to include a clause enabling a change of the proper law of the trust and of its place of administration. There are no exchange controls in Gibraltar.
Setting aside a trust
In certain instances a trust may be set aside. If a trust is set up for an illegal or immoral purpose or is contrary to public policy it will be declared void. A trust set up to defraud creditors will be set aside by the courts. A trust, not being a trust created before and in consideration of marriage, or made in good faith and for valuable consideration is, if the Settlor becomes bankrupt within two years after creating the trust, void against his or her trustee in bankruptcy. If he or she becomes bankrupt at any subsequent time within ten years from the creation of the trust, it is void against the trustee in bankruptcy unless the parties claiming under the trust can prove that at the time of creating the trust he or she was able to pay all his or her debts without the aid of the trust property.
Asset protection trusts are treated differently.
Other forms of trusts
Asset protection trust
An amendment to the Bankruptcy Ordinance made in 1990 now enables Asset Protection Trusts to be established. The amendment to the Bankruptcy Ordinance means that certain dispositions shall not be voidable at the instance of or upon an application by any creditor or settlor provided certain conditions are complied with.
The settlement of assets will not be voidable by any creditor to the settlor provided that:
The settlor is an individual.
The settlor is not insolvent at the date of the settlement.
The settlor does not become insolvent in consequence of the settlement before the settlement is registered.
An application for registration of the settlor must specify:
The name and address of the trustee.
The name of the settlement.
The date of the settlement and it duration.
The settlor’s country of residence.
The application must also be accompanied by undertakings from the trustees that:
The settlor has completed forms of enquiry administered by the trustee.
The trustee has completed all reasonable enquiries necessary to substantiate the information provided by the settlor.
The settlor has sworn an affidavit confirming that he or she is not insolvent.
With regard to the taxation of such a trust, the income of a trust created in Gibraltar by and on behalf of a non resident of Gibraltar, is exempt from Gibraltar tax even if the trustees are resident in Gibraltar. This particular provision requires that, under the provisions of the trustee, no Gibraltarian or resident of Gibraltar is or may be a beneficiary under the trust and that the income of the trust either accrues or derives outside Gibraltar.
Enforcement of US judgements in Gibraltar
It is interesting to note that unlike other asset protection areas Gibraltar’s law is contained in our Bankruptcy Ordinance. Provided that the assets are settled by an individual who is not on the date of making the disposition insolvent or would not become insolvent as a consequence thereof, such a disposition will not be voidable at the instance of, or upon application by, any creditor of the settlor. It would therefore seem that Gibraltar does offer substantial protection to settlors.
Presumably however, if property assets are settled into the trust which remain in the USA then the USA will find a means within their own laws of making such dispositions voidable. Bank deposits are therefore secure assets for an asset protection trust when deposited in Gibraltar with a bank whose head office has no arrangement with the USA. Although Gibraltar is a separate jurisdiction we would not advise the disposition of assets into a bank which is established in the USA.
Other areas of concern regarding asset protection trusts would revolve around fraud or drug trafficking. However, such cases are usually brought to trace money and repatriate the proceeds of fraud. With Gibraltar having amended its bankruptcy laws to enable asset protection trusts to be effected, we would believe that the courts would need to be satisfied that the settlor was insolvent at the time of making the disposition. The requirement of the settlor at the time of making the disposition remains applicable throughout the time of the trust. Therefore, it would remain open to the US Government to allege that at the date on which the asset protection trust was established the settlor was insolvent. If this was the case then the trust would be set aside.
Should you have any further question regarding Gibraltar Trust, please do not hesitate to contact one of our consultants.
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