Estate planning : trusts and foundations under Maltese law

Abstract

The aim of this thesis is to examine estate planning from its various facets. One of the primary questions that is asked is: who is likely to be interested in estate planning, or rather what type of person. When discussing estate planning one must take into consideration the number of views on the subject. Each case must be examined in isolation due to the fact that every individual who resorts to estate planning has his own personal needs. Hence, it is difficult to establish one unique and universal profile of who is interested. When referring to 'various schools of thought," these are referring to the views of various banks in Malta and various audit firms. I have personally conducted interviews with the estate planning departments of Bank of Valletta plc and HSBC Bank Malta plc and various audit firms including, Deloitte and Touche, Grant Thornton, PriceWaterhouseCoopers and KPMG. I have also consulted a considerable amount of corporate literature. This thesis aims at highlighting the factors an individual should consider before resorting to any institute for estate planning and which a practitioner should point out to an individual who may be interested in such estate planning. In order to estate-plan one could use various instruments such as the trust, foundation and limited liability company, each of which have been examined in this thesis. The way in which Malta has managed to insert the trust institute into a Civil jurisdiction is also discussed in brief. Whilst this thesis aims at analyzing the trust and foundation as vehicles for estate planning, it was also necessary to insert the company in order to have a complete analysis. Even though this particular subject has been dealt with partly in other writings, it was felt that it was necessary to be inserted in this thesis for the proper progression of the arguments it brings forward. Before ,one decides what vehicle to use for the purposeof estate planning, he must be fully aware of all the advantages and disadvantages involved in choosing one particular vehicle instead of another. Due to the fact that there is no law on foundations at this present time, no reference could be made to any law on foundations other than to mere references to the institute. In spite of this, the drafting of a law on foundations is in progress, which is to be inserted into the Civil Code as a Schedule to it. This law is still in its early stages and is subject to changes and therefore it was not possible to insert it in the thesis as an appendix. However, each article that has been referred to is quoted. In this way any arguments that are put fonvard could be checked with the actual wording of the draft. The draft on foundations is referred to as the Draft Law on Foundations. The taxation of the trust, foundation and company is also examined. This is not looked on as the only factor in deciding whether to estate plan or in deciding which structure to use for estate planning. However, it is regarded as one of the reasons for which persons are driven to set up trusts, foundations or companies for estate planning purposes. Even though tax is only one of the reasons for which a person may wish to resort to estate planning, the tax implications of setting up one of the three instruments referred to are critical and as a result it is necessary to analyze them. Certain practical considerations, especially relating to taxation have been analyzed in conjunction with advice given to me by senior members of the Revenue Department. Other issues relating to estate planning, including non-tax driven reasons for estate planning are also discussed.