Dr Paul DeBattista 15 March 2017 1
Setting up of a Protected Disability Trust Dr Paul DeBattista 15 March 2017 2
Applicable Legislation Chapter 331 – Trust andTrustees Act Legal Notice 324 of 2016 – Trusts and Trustees Act (Protected Disability Trusts) Regulations, 2016 Dr Paul DeBattista 15 March 2017 3
Reasons for setting up a Trust to support a disabled person who cannot manage his property or money, so that his needs are looked after, even when the parents (usually) are not able to help him to make sure that any own or inherited assets of the disabled person are administered in the best interest of the disabled person by a professional person Fiscal Incentives Dr Paul DeBattista 15 March 2017 4
Protected Disability Trusts Regulations To regulate the setting up and administration of trusts formed for the benefit of beneficiaries at least one of whom is a person with disability Dr Paul DeBattista 15 March 2017 5
Eligibility Criteria Is set up by a family member of the person with disability Is set, exclusively but not necessarily, for the benefit of the disabled person Dr Paul DeBattista 15 March 2017 6
Good to know It is important that the purpose and the benefits that the disabled person will be entitled to get from the setting up of such a Protected Disability Trust, be clearly specified and written in the trust instrument On the demise of the disabled person, the trust will be closed Dr Paul DeBattista 15 March 2017 7
Beneficiaries Person with disability benefits exclusively from the trust assets The parents of the disabled person will be the preferred beneficiary during their lifetime Following the demise of parents, disabled person shall be the sole beneficiary under the trust Dr Paul DeBattista 15 March 2017 8
Trust Assets LiquidAssets (cash) Primary place of residence of disabled person (cannot be disposed of while disabled person is still alive, except with the prior written consent of protector and confirmation from Court) Other immovable property Dr Paul DeBattista 15 March 2017 9
Who qualifies as a person with disability A person over the compulsory school age, who as a result of the disability (physically or mentally) cannot enter or be retained in employment A person qualifying as a disabled individual as defined in the Equal Opportunities (Persons with Disabilities) Act A child certified, by a Medical Panel as stipulated under the Social Security Act, as suffering from physical or metal disability Dr Paul DeBattista 15 March 2017 10
Who qualifies as a family member The parents (including step-parents and adoptive parents) The spouse A partner in civil partnership A son, daughter, brother or sister aged eighteen years or over Uncle or aunt Dr Paul DeBattista 15 March 2017 11
Administration of the Protected Disability Trust ProfessionalTrustee; or PrivateTrustee, provided that: He is not beneficial or has any other interest in the trust assets Should follow the obligations and responsibilities under this Act He is to undergo adequate training to execute his duties (within one year from being appointed) A professional trustee is to be appointed (by settlor or protector) as co- trustee Dr Paul DeBattista 15 March 2017 12
Criteria for eligibility to be a Trustee A person of good reputation possessing experience and qualifications in financial, accounting or legal services and approved by the MFSA as being fit and proper to carry out the duties of a trustee Dr Paul DeBattista 15 March 2017 13
Role of the protector (1) Giving written consent to trustee to dispose of the residential property while the disabled person is still alive (but also confirmation from Court) Give consent for trustee to transfer assets from the trust Consulted before trustee exercises discretion and takes decisions related to distribution of income or capital Consulted before the trustee takes decisions relating to the medical and educational needs and the care of the person with disability Dr Paul DeBattista 15 March 2017 14
Role of the protector (2) Consent for a trustee or a co-trustee prior to resignation Has the power to remove a trustee and appointing a new trustee On giving consent to transfer of any assets from the trust, protector is be sure that this is being done in the best interest of the disabled person. In case of uncertainty, the direction from Courts is to be sought Dr Paul DeBattista 15 March 2017 15
Main Obligations of the trustee (1) Open and maintain bank accounts on behalf of the disabled person Seek to generate income from assets held by investing liquid assets or leasing of immovable property The type of investment should be one of a conservative investment portfolio The investment shall be predominantly in regulated markets Dr Paul DeBattista 15 March 2017 16
Main Obligations of the trustee (2) The investment portfolio should be as diversified as possible No more than 10% of the assets shall be invested with any entity No more than 10% shall be invested in securities which are not traded on a market (Stock Exchange) No more than 50% of the property assets shall be kept on deposit with any one body Dr Paul DeBattista 15 March 2017 17
Main Obligations of the trustee (3) The trustee shall maintain a balance between generation of income and the preservation of capital, while generating sufficient proceeds to meet the expenditure requirements of the beneficiaries in accordance with the provisions of the trust instrument Dr Paul DeBattista 15 March 2017 18
Remuneration to be paid to trustee A trustee can opt not to ask for any remuneration (although he is entitled to such remuneration) The annual remuneration to be paid shall not exceed € 400 (important to include the applicable fee in the trust instrument) The fee agreed is fixed for three years Any increase in the fee shall be proportionate to the increase in the index of inflation This fee is applicable where the cumulative nominal assets do not exceed the value of € 450,000 Dr Paul DeBattista 15 March 2017 19
Supervision on the trustee The trustee is obliged to notify the Malta Financial Services Authority (MFSA) of the Protected DisabilityTrust which is set up Among the details which are communicated to MFSA, there will be a complete and detailed declaration regarding the nature and value of assets held in the trust A copy of the signed trust instrument is also deposited with MFSA Any other information requested by MFSA MFSA can cancel or suspend a trustee to continue to act as a trustee on serious breech of law and non-adherence to relevant regulations Dr Paul DeBattista 15 March 2017 20
Fiscal Incentives (1) No donation tax is due on the transfer of any immovable property: • where the transferee is a trust, which has as a lifetime beneficiary, either initially or immediately subsequent to the life interest of the settlors or transferors, a person who is on the Register of Persons with Disability kept by the National Commission Persons with Disability set up in terms of the Equal Opportunities (Persons with Disability) Act Dr Paul DeBattista 15 March 2017 21
Fiscal Incentives (2) No Capital Gains Tax is due on the transfer of any immovable property: • where the transferor is a trust, which has as a lifetime beneficiary, a person who is on the Register of Persons with Disability kept by the National Commission Persons with Disability set up in terms of the Equal Opportunities (Persons with Disability) Act, provided that the trustee or administrator submits a declaration to the Commissioner that the proceeds are for the sole benefit of that beneficiary during his lifetime Dr Paul DeBattista 15 March 2017 22
Fiscal Incentives (3) No duty on transfer is due by the heirs on the transfer of the immovable property which was the residence of the parents of the disabled person and in which the disabled person resided during his lifetime up to his death Dr Paul DeBattista 15 March 2017 23
Thank You Dr Paul DeBattista 15 March 2017 24
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