Comparison of Malta Trusts and Foundations

Dr. Priscilla Mifsud Parker | Published on 13 Jul 2016 | Updated on 12 Sep 2019

Trust Law

Malta Trusts and Foundations

Malta trusts and Malta foundations are two institutes that vary in their essential elements and it is important to understand the differences in order to be able to apply the most efficient and appropriate vehicle for a particular scenario. In Malta, the Trusts and Trustees Act (the "Act") Chapter 331 of the Laws of Malta regulates trusts. On the other hand, foundations registered in Malta are regulated by the Second Schedule of the Civil Code, Chapter 16 of the Laws of Malta. 

Traditionally trusts existed in common law jurisdictions and foundations existed in civil law jurisdictions. This is however no longer the case as there are various jurisdictions which have a law regulating both including Malta.

The main differing features:

The main differing features between Malta Trusts and Malta Foundations are as follows:

  • The Malta Trust has no separate legal personality and for instance, cannot sue and be sued. The right here vests in the trustee. However, Malta Foundations do have separate legal personality. Malta Foundations are registered with the Registrar for Legal Persons.
  • A Malta Trust does not have the requirement of being registered as is the case with many other trust jurisdictions. This means that there are no initial registration fees. A Malta Foundation, on the other hand, can be set up either by means of a public deed or else through a testamentary deed which will be registered with the Registrar for Legal Persons.
  • In the case of a Malta Trust, it is the settlor who sets it up through the initial settlement. A Malta foundation, on the other hand, is set up by the founder.
  • A Malta Trust is funded through the initial and subsequent settlements by the settlor/s and accepted by the trustee. A trust cannot exist without the trust assets. A Malta Foundation, on the other hand, is "endowed" with assets by its founder. The initial endowment for a Malta Foundation needs to be of at least € 1,200.
  • A settlor can retain settlor reserved powers under a Malta Trust however if this is taken too far then there is always the risk of this trust being deemed to be a sham trust. Therefore once the settlor settles the property on trust he no longer has control over the trust property. A founder can also retain powers under a Malta foundation and in fact, when compared to the settlor has more control. Maltese law allows a greater degree of control to the founder over the assets of the foundation.
  • A Malta Trust can be set up for a maximum of 125 years. Legal persons generally do not have a time limit for existence unless the law provides otherwise which is exactly the case for the Malta Foundation where under Maltese law there is a limit of up to 100 years for a private foundation. On the other hand purpose foundations, foundations used for collective investment vehicles and foundations used for securitisation transactions may be established for an unlimited term.
  • A Malta trust is run by the trustees whilst a Malta Foundation is run by its administrators. The trustees have a fiduciary responsibility to the beneficiaries of the trust.

 

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The above is not an exhaustive list of the differences that exist between the two institutes and a lot also depends on the drafting of the trust deed and of the deed of foundation in order to determine limits, freedoms and rights of the parties involved. Indeed, the Malta trust and the Malta foundation also share a number of similarities and one cannot determine the preference to one over the other unless a specific scenario is presented and assessed.

Our Malta Trust Services

With specific legislation catering both foundations and trusts,, it is naturally evident that the Malta Trust is increasing in its popularity. The industry in relation to professional trustees is consequently expanding, where Chetcuti Cauchi Advocates are one of the leading players and offer professional trustee services to local and international persons, whether legal or natural for commercial as well as private trusts.


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