Charitable and Disability Trusts

Specific cases need specific solutions, and Maltese law caters for this when dealing with Charitable Trusts and Disability Trusts.

Charities can take various forms, one of which is a Trust arrangement. In fact, the only purpose Trust which can be created under Maltese law is a Charitable Trust, which purpose is defined in the The Trusts and Trustees Act as any charitable, social or philanthropic purpose which may include, the advancement of education, sports, health, religion, culture, arts, national heritage, environmental protection and improvement, the promotion of human rights, conflict resolution and democracy, and social and community advancement. The flexibility offered by a Trust arrangement can prove to be very attractive as the vehicle of choice for the setting up of a Charity.

A Charitable Trust may also fall to be regulated by the rules of the Voluntary Organisation Act, which make it eligible to be enrolled as such with the Commissioner for Voluntary Organisations. This gives the charity further public standing and also allows it to enjoy certain privileges as contemplated by the said Act.

Within the context of charitable Trusts, our law also provides for the possibility of appointing an Enforcer. The role of the Enforcer is that of ensuring that the Trustees are administering the Trust and its property in a manner which promotes the charitable purpose for which it was established. The Enforcer is also empowered by law to take action against the Trustee should it result that the Trustee is not acting according to the charitable purpose outlined in the Trust instrument.  While it is not mandatory to have an Enforcer within the context of a Charitable Trust, this may provide further peace of mind for those persons establishing a charitable Trust.

Maltese law also provides specifically for Disability Trusts through an ad hoc piece of subsidiary legislation entitled the Trusts and Trustees Act (Protected Disability Trusts) Regulations which entered into force in October 2017.  These regulations specifically cater for those situations where family members would like to establish a Trust for the benefit of a family member that suffers from a disability (also referred to as the Protected Beneficiary), thereby ensuring that even after the death of a family member, the person with disability would still be taken care of financially.

The rules regulating such Disability Trusts are quite stringent as they are designed to ensure that the assets are held in Trust for the benefit of the Protected Beneficiary. In fact these regulations specifically provide that during the lifetime of the Protected Beneficiary this beneficiary must either be the exclusive beneficiary, or alternatively the parents of the Protected Beneficiary may be the preferred beneficiaries during their lifetime as long as after their demise the Trust property is then held for the sole benefit of the Protected Beneficiary. It is also mandatory for such Trusts to have a Protector appointed and the Trustees are also duty bound to follow strict rules relating to the investment of the Trust assets, which rules are aimed at ensuring a prudent and cautious approach to investments, in the best interests of the Protected Beneficiary. These Disability Trusts may also avail themselves of certain fiscal incentives, in accordance with the Income Tax Act, especially where immovable property is being held in Trust.

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