Real Estate in Trusts
Statistically, real estate is the biggest investment in our personal estates. Specifically, our residential home would be our most valued possession, as it goes without saying, that typically, we invest heavily in our residence.
On the other hand, immoveable are not solely used as our primary residence but also an investment. Historically, an immoveable property has always been considered as a safe and durable investment, especially in Malta. This has proven topical in the past decade where the Maltese property market appreciated significantly. The rental market flourished, both for long and short term, increased the appetite for the purchasing of property as an investment.
Being the family-centric society that we are, many have coincided the purchase of a property, as in investment which produces an income for the present but also that can serve a future property for their heirs. This creates the necessity to plan the estate carefully to deliver the plan foreseen of the individuals.
Can you have an immoveable property held in a Trust?
Yes, immoveable properties are typical assets which are held in Trust.
Why would you want to have a property in Trust?
The reasons can be various and would be in response to the needs of the individuals setting up the Trust. When having a property in Trust, effectively the individual is transferring the ownership of the property to the Trustees for the benefit of the beneficiaries as outlined in the Trust Deed. Bearing in my mind the Trust Deed is tailor made for the individual’s needs; the outcomes are varied.
The Trust is set over a long term allowing for the property held by the Trust for numerous years; resulting in effectively controlling it over that span of time. In simple terms and as an example, if a property is settled in Trust, the settlors may require for such property not to be sold but their children to live it. An alternative would be to retain the property and renting it; with the income used to benefit the Beneficiaries.
On the other hand, it may be so wished for the property to be sold and the heirs taking the proceeds. Having the property held by the Trustees would mean that the process of the sale of the property will be done by the Trustees and not the heirs. The proceeds would then be split accordingly avoiding all the hassle that come with selling properties. Such a set-up is very popular when individuals have 2 or more properties.
The distribution of proceeds can also be time bound or dependant on circumstance of the heirs for example attaining certain age.
What both scenarios achieve is to regulate what happens to the properties settled in Trust, particularly after one’s death. As a bonus, one would be making sure that no conflicts arise within the family, after the individual’s death and simplifying a process which the Trustees will carry out as desired by the individual.
Would you still be able to use the property if it’s in Trust?
How the assets are manged whilst held in a Trust is regulated by the Trust Deed. The Trust Deed is drafted as required and in accordance to the various individual’s needs. This means that, yes, the property can still be in control of the individuals if so wished. Typically, the individuals would want to retain the use of the property; similarly, if the property is rented out the individuals will remain managing the property and retain the income.
Such an arrangement would allow the individuals to have the ownership property regulated but still retaining the enjoyment of the said property.
Is it expensive and would there be tax due involved?
The tax implications would need to be looked into on a case by case basis; however, the rule of thumb is hat there will be no fiscal advantages or disadvantages when using a trust.
The fees for setting up and administering a trust is not excessive and dependant on the amount of work involved; thus, ensuring value for money.