High Net-Worth Individuals and Private Businesses to Benefit from the New Trust Law in UAE

March 11, 2021by Admin0
Benefits

UAE’s Ministry of Finance (MoF) issued the Federal Decree – Law No. 19 of 2020 regarding Trusts. The Common Law concept of Trust has been incorporated into the Civil Law regime of UAE for the first time. The Federal Decree Law has given recognition to the operation of various Trusts, including DIFC and ADGM Trusts.

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This development will help the finance sector and provide new methods to manage wealth. The Decree-Law will scale up the quality of financial legislation and policies in UAE. It also encourages the allocation of funds to Charitable Trusts.

Trust Law is an important value addition to the advanced legislative structure of the UAE. The law introduces new investment tools to address the limitations of existing investment vehicles. The methods introduced by a Trust for creating investment vehicles are simple and less expensive. It also enhances the competitiveness in private business environment.

The new law enables companies or people to hand over their wealth and rights to a Trustee. This Trustee will be entrusted with managing and developing assets with the help of legal tools. Formation of trusts and their purpose, operation and dissolution are regulated by the Decree. It also defines the rights and duties of the Trust Parties, namely, the settlor or grantor, the beneficiary, the trust protector and the trustee. The Trust is ruled by a deed which is proposed by the settlor.

Trust Parties

A Trust constitutes of four categories. The Settlor, Trustee, Beneficiary and Protector. The Settlor creates and allocates trust assets. The Trustee administers the trust for the benefit of a beneficiary or beneficiaries. The Beneficiary holds a personal right in the Trust.  Protector protects the rights of the beneficiary.  

Implications of the New Law

The Trust law will particularly help family-owned businesses and high net-worth individuals to facilitate succession planning as well as long term planning for business assets. The Federal Decree also includes various kinds of covenants with specific purposes, such as a “Charitable Trust” created for specific charitable purposes.

The law also contains a provision called “Private Trusts” for setting up different forms of securities that are acceptable in the financial markets. These can be used for establishing retirement pension funds or superannuation funds, for providing benefits to the beneficiaries in exchange of regular contributions. The Trust Law allows the creation of an investment fund which can be used to receive contributions by the investors.

Source: https://gulfnews.com/business/markets/uaes-new-trust-law-will-support-wealth-management-financial-regulation-1.77093862

About ATB Legal

ATB Legal is a full-service legal consultancy in the UAE providing services in dispute resolution (DIFC Courts, ADGM Courts, mainland litigation management and Arbitrations), corporate and commercial matters, IP, business set up and UAE taxation. We also have a personal law department providing advice on marriage, divorce and wills & estate planning for expats. Please feel free to reach out to us at office@atblegal.com for a non-obligatory initial consultation.

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