Malta Introduces New Regulations for Protected Disability Trusts

By virtue of Legal Notice 324 of 2016, the Minister of Finance has made Regulations under the Trust and Trustees Act with regards to Protected Disability Trusts.

These Regulations have been formulated to provide regulatory guidance for the formation of a Trust where at least one of the Beneficiaries is a person who is classed as having a disability. A person who is classed as such must fall into one of the following categories:

1. Someone with a disability who benefits exclusively from the Trust assets as a sole income;
2. Someone with a disability who places their parent(s) as preferred Beneficiaries during their lifetime and will become the sole Beneficiary under the Trust after the parent(s) are deceased.

This type of trust is known as a Protected Disability Trust, and in order to be considered as such, they must:

1. Be set up by a direct family member of the individual who is classed as disabled;
2. Be for the sole benefit of the individual who is classed as disabled;

A person who is classed as disabled in the context of this Trust and these regulations, is a person that meets the following criteria:

1. Someone with a disability who is over the legal compulsory school age, and who suffers from a disease, injury, deformity, or mental health issue which is substantial enough as to prevent the person from undertaking employment or work of any time.
2. Someone who meets the criteria of disability as defined by the Equal Opportunities (Persons with Disability) Act:
3. A person, such as a child, who is certified to be suffering from physical and or mental disability needs to be included here – the law states that these individuals would be classified as disabled.

In the context of this Trust, during the Beneficiaries lifetime, the Trustee will act and administer all Trust assets whilst acting in the interest of the person with the disability. There are some exceptions to this:

1. With written consent from the Protector; and
2. The Courts confirmation that the disposal is just and in the ultimate benefit of the person with the disability.

The regulations continue that the Trustee of a Protected Disability Trust may appoint a Trustee who is:

1. An authorised Professional Trustee who receives no remuneration for providing such a service, or receives remuneration but within the parameters defined below;
2. A private Trustee.

The Act specifies that such a person must not also be a Beneficiary under the same Trust that they are a Trustee of.

In the case where a Professional Trustee is engaged, the fee for doing so must not be in excess of €400 per year or any number that is considered to make a significant change to the way of life of the recipience. This fee must remain the same for three years and can only increase after that period in line with the current percentage of inflation. It is pertinent to note that this restriction only applies in cases where the assets of the Trust do not exceed €450,000.

As well as all duties specified by the Trusts and Trustees Act, the Trustee is also responsible for opening and maintaining all bank accounts referencing the Trustee and Trust as well as seek to generate income from the assets held by investing money as specified by the Regulations, or by leasing property when it is in the sole interest of the person with the disability.

The Protector of the Trust is someone that must be appointed under all circumstances and they should be a person with no actual or potential interest in the assets relating to the Trust. This individual’s powers are exercisable and will come into effect no later than the time when the person with disability becomes the sole beneficiary. As a general rule, this person will always be consulted before the Trustee makes any decisions regarding the distribution of income or capital, the educational or medial needs of the person with disability. Furthermore, they Trustee must obtain permission and consent from the Protector prior to the transfer of any assets from the Trust, or the resignation of the Trustee.

ARQ Group regularly assist clients with the setup, administration, and ongoing maintenance of a variety of Trusts. We can provide a personalised service from A-Z and can provide this service to both local, and international clients. We pride ourselves on offering an efficient and professional service and having the experience necessary to handle every type of structure and any challenges that may arise from the management of them.