Trusts
We provide a full range of trust and fiduciary services including:
- Formation of Isle of Man trusts
- Formation of any underlying company structure
- Administration of trusts
- Provision of trustees
- Accounting services for trustees
- Arranging banking facilities
As we are part of the MannBenham group of companies which includes MannBenham Advocates Limited an Isle of Man legal practice, we have access to specialist legal advice. When a bespoke service is required we can arrange for trust documentation to be specially drafted.
We do not provide tax advice and instead work with the clients tax advisors and where necessary we can introduce you to local specialist tax advisors.
Trusts – Background Information
A trust is a fiduciary relationship whereby a person called the trustee receives an asset from another person called the settlor to hold for the benefit of a third person called the beneficiary on defined terms.
Isle of Man Trust law is closely modelled on English trust law. The principal Isle of Man trust statute is the Trustee Act 1961 as amended by the Trustee Act 2001. The Isle of Man legislation places a high duty of care on trustees which provides added protection for settlors and beneficiaries.
The trust imposes strict obligations upon the trustees to manage and deal with the trust assets in accordance with the terms of the trust.
The legal ownership of the assets passed into the trust arrangement are vested in the trustee in trust for the beneficiaries. The beneficiaries have an equitable interest in the assets held in the trust. Beneficiaries can enforce their equitable rights in the Islands courts.
The settlor can retain some influence over the way the trust assets are administered through the terms of the trust deed and if appropriate a letter of wishes.
The trustee has a strict duty under Isle of Man law to properly administer the trust and take account of the provisions in the trust deed and the requirements of the beneficiaries.
The most common method of establishing a trust is by the execution of a trust deed and the transferring of the trust assets to the trustees.
Types of Trusts
There are a number of forms of Isle of Man trusts. For the purpose of personal planning the most common form of trust is the discretionary trust.
- Discretionary Trust
A “discretionary” trust is a trust under which the trustees are given a discretion in the trust deed as to the distribution of the trust assets. While the trustees are given a wide discretion they must exercise that discretion for the benefit of the beneficiaries.
A typical discretionary trust deed will specify a class of beneficiaries and the trustees will periodically decide whether to distribute trust income or assets to one or more of the class or to retain it for the present time.
The settlor can provide the trustees with a “Letter of Wishes” which sets out his suggestions as to how the trust assets should be distributed amongst the beneficiaries. The letter of wishes can give the trustees useful guidance as to the views of the settlor on the issue of the distribution of the trust assets, however it is not binding on the trustees and the trustees will use their discretion taking into account all of the circumstances at the time before deciding on the distribution of the trust assets.
- Life Interest or Interest in Possession Trust
In an “interest in possession” trust or “fixed interest” trust a particular beneficiary is entitled to the net income of the trust for a specified period. The entitlement or “interest” may be for the life of the beneficiary and on upon his death the trustees will have a discretion as to whether to distribute the trust income amongst a class of discretionary beneficiaries, to retain it and add it to capital or to create a new life interest.
- Purpose Trusts
The Purpose Trust Act 1996 allows for the creation of Isle of Man purpose trusts.
A purpose trust is a trust which does not have any beneficiaries, and exists for a specific purpose. The purpose must be certain, reasonably possible and not contrary to law, morals or public policy.
Under Isle of Man law there must be two or more trustees to a purpose trust, at least one of whom must be a person in one of the categories specified by the Act. To enforce the trust there must be an ‘Enforcer'.
Purpose trusts have been used for the following:
- off balance sheet transactions
- corporate finance and asset financing
- division of voting and economic benefit
- ownership of trust companies
- Securitisation
- social benefits and investment in family companies.
Ownership of companies by trusts
A common method of holding trust assets is for the assets to be held in companies and for the shares in the companies to be owned by the trust. This is of benefit where the trust assets are trading companies or are constantly changing. The day to day activities of the business is then operated by the directors of the company but the ownership of the company remains in the trust.
Isle of Man Trust Legislation
- Trustee Act 1961 – deals with administrative matters such as investment powers of trustees, appointment and discharge of trustees and the powers of the court
- Variation of Trusts Act 1961 – allows the court to vary the terms of a trust upon a beneficiary's application
- Perpetuities and Accumulations Act 1968 – provides for the duration of a trustand the trustee's ability to accumulate income
- Recognition of Trusts Act 1988 – extended the terms of the Hague Conventionon the Law Applicable to Trusts and Their Enforcement to the Isle of Man and
provided for the recognition of foreign trusts
- Trusts Act 1995 – excludes property held in Manx Trusts from foreign heirshiplaws and other laws concerning the creation of trusts of non-Manx assets
- Purpose Trusts Act 1996 – allows non-charitable purpose trusts to be createdunder Manx law
- Trustee Act 2001 – enacted to widen the powers of trustees, as well as toimpose safeguards for beneficiaries
