English trust laws formed the basis of the Trust Managers Act, which regulates the activities of trusts in Gibraltar. There are also a number of Decrees, among which:

- Decree establishing the terms of existence of trusts and capital accumulation,

- Decree on the investment of trust companies,

- Decree on Insolvency,

- Decree on recognizing the legal force of trusts.

Under the Bankruptcy Act, trusts that were created for the purpose of protecting assets can not be claimed by creditors in the event that the founder is an individual, and when transferring assets to the trust, he was not insolvent and would not become insolvent as a result of the management of the trust and its assets.

The constituent documents of the trust are compiled in English and are registered only in the Property Management Register, which is necessary for the protection of trust property. For the most part, the period of validity of the trust in Gibraltar is 100 years. There is no stamp duty in Gibraltar, as there are no limits on the amount of property accumulated during the period of existence of the trust. Trusts, the founders and beneficial owners of which are non-residents of Gibraltar, are exempt from registration and all taxes.

Advantages of the Gibraltar Trusts

- Confidentiality of information about the trust - only those trusts that were established for the protection of property are to be registered.

- Absence of payment of all taxes (if the trust does not receive income in Gibraltar, and its founder and beneficial owners are not residents).

- Transfer of trust assets is not subject to Stamp Duty unless it is a real estate located in Gibraltar.

- The fact that the trust manager is a resident of Gibraltar can not affect the tax status of this trust. It is important that in the constituent documents of the trust, there is a clause stating that the beneficial owners of the trust can not be residents of Gibraltar.

- There are no limitations in the choice of currency for trust assets.

- Reporting on the activities of the trust is not required.

Structure of the trust in Gibraltar

The founders of the trust are those persons who created the trust and transferred their assets to it. Sometimes, in order not to disclose own name when creating the trust, the founder may order the trustee to submit an application on the establishment of the trust on his own behalf.

The trust manager or trustee can be either a trust company or an individual. Usually no less than two trustees who are individuals are appointed, so that the trust can not be left without management, if suddenly one trustee fails to fulfil his duties (because of illness, death, other reasons).

Beneficial owners are persons who benefit from the disposal of trust assets by their manager. In the constituent declaration of trust, there is a full list of beneficial owners and documents for each of them. Beneficial owners are entitled to demand performance of conditions under the deed of trust from the trustee through the court proceedings.

According to the trust laws of Gibraltar, the founders of the trust can appoint advisers or protectors, as they are also called. Trust managers in Gibraltar have quite extensive powers and can add beneficial owners to the trust or impose a ban on their addition, change the jurisdiction according to which the trust was created. However, if the trust has the adviser, then for a number of powers stipulated in the declaration of trust, the manager can act only with the written permission of the adviser. Basically, we are talking about the exclusion or addition of beneficial owners. In some cases, the adviser may appoint a new trust manager or change the place of management of the trust. The rights and powers of advisers are stipulated in the founding agreement or in a separate document concluded between the founder and the adviser. It is possible to prescribe the appointment of the next adviser (in case of death of the previous one). In order to avoid negative consequences of taxation, if there is a suspicion that the manager or adviser is exerting excessive pressure on trust managers, it makes sense to limit their authority by the actions of managers who are prescribed and approved by the trust agreement (trust deed).

Discretionary trusts in Gibraltar

Discretionary trusts are prevalent in Gibraltar, during the establishment of which a "Memorandum of Wishes" is drawn up. Also, when compiling a constituent agreement of a trust of this type, the manager, at his own discretion, determines the amount of income and trust capital, and also determines the timing of its distribution. Due to the foregoing, the trust manager can collect and process information about the financial position of a particular beneficiary in order to distribute his income with minimal taxation.

In the Memorandum of Wishes, the founder of the trust describes his desires for trustee in the sphere of management of the trust. The founder can make various amendments to the Memorandum, for example, a new member of the family was born and is brought into the beneficiaries of the trust. Of course, the manager may not take into account these wishes, but in fact, rarely any of the managers goes for this.

Advantages of discretionary trusts

All assets that have been transferred to the trust are not the property of the founder from the moment of their transfer, thus:

- The founder does not pay taxes on profits or capital from assets transferred to the trust.

- The founder is exempt from the inheritance tax.

- Creditors of the founder can not claim trust assets upon the condition that this trust was legally established and did not cause the financial difficulties of the founder.

- During the existence of the trust, its assets are the property of the trustee, but the final right to use them and ownership remains within the competence of the beneficial owners, and the founder himself may influence the disposal of the trust assets during his life.

- No taxes are levied on a properly established trust. But it should be taken into account that the founder and beneficial owners can fall under the tax obligations of the countries of which they are residents.

Trusts created to protect assets

There are trusts, the creation of which is necessary to prevent possible future claims of creditors with regard to certain assets transferred to the trust. Confidentiality in the registration of trusts in Gibraltar by non-residents was achieved after the introduction of amendments to the Bankruptcy Act. After the amendments to the Bankruptcy Act adopted in 1990, certain orders can not, under certain circumstances, be considered invalid at the time of submitting application by creditors.

A vivid example of a trust created for the protection of assets can be considered a discretionary trust, in which the founder is also a beneficial owner. This type of trust accumulates assets within the duration of its validity. It is important that the trust falls under the definition of an irrevocable one, and its assets and the persons controlling them are in offshore jurisdictions. At the same time, the founder should not retain the rights to distribute trust capital, replace managers or location of a trust established to protect assets.

Possible risks of trusts created to protect assets

Any person transferring assets or involved in their transfer to a trust established to protect assets, while the founder of this trust is considered bankrupt, may incur both administrative and criminal liability. Establishment of such trusts can be called desirable only when, as an alternative to the distribution of property inherited, it would be the creation of a trust in the territory of the country of residence.

Creditors will not be able to be eligible for trust assets if:

- the founder of the trust is an individual;

- at the time of establishment of the trust the founder was financially sound and solvent;

- the founder does not declare himself bankrupt as a result of the establishment of the trust and before its registration.

Documents required for registration of the trust

When a founder submits an application for registration of a trust, the following information must be indicated therein:

- full name and address of the trust manager;

- name of the registered trust;

- term of existence of the trust and the date of its establishment;

- name of the country in which the founder is a resident;

- forms of requests completed by the founder;

- forms of requests filled in by the manager to confirm the information provided by the founder;

- a written statement of the founder, made under oath that he is not bankrupt.

Use of an offshore company for the purpose of a trust

Quite often, trust assets are placed within an offshore company. Such a company acquires any assets: real estate, securities, etc., and all shares of this company are owned by the trust. Such a scheme allows to increase the possibilities of the trust and to exercise greater control in the management of trust assets.