It is known that trust relationships are formed for many reasons
and purposes. A settlor may indeed tailor a trust for any purpose
provided that it is not against public policy, illegal or in
contravention of the fundamental tenets of trust law. Within such
limits, the purpose for which trusts may be set up are infinite and
it is impossible to have an exhaustive list of 'types' of
Lawyers will agree that it is a very common occurrence to come
across clients who are concerned about the risks of their
irresponsible child recklessly spending a lump sum received upon
inheritance or who is naturally unable to control his spending and
so forth. Such a problem could be addressed by setting up a
so-called spendthrift trust which would be created
for the benefit of the child as beneficiary of the trust. In such
case an independent trustee would have exclusive authority to
decide on the manner in which the trust funds may be managed and
made use of for the benefit of said beneficiary.
These trusts would be normally created by parents with the
specific aim to distribute money to their children as beneficiaries
of the trust at a regular rate but do not typically permit the
distribution of large lump sums. These trusts are also designed to
protect the trust fund from any legal actions of potential
creditors of the spendthrift children on the ground that creditors
of beneficiaries generally cannot reach the funds in the trust. The
funds are not actually under the control of the beneficiary since
his interest (cash or property) in the trust would only belong to
him once that interest is actually distributed to him or her by the
We have recently seen on the news that the late Michael
Jackson's largest asset is likely to be held in a
'spendthrift trust'. This asset which appears to be his 50%
interest in the Sony/ATV music publishing catalogue with a reported
value ranging between $500 Million and $1 Billion dollars was
described as an asset 'shielded from creditors'. Once
settled in this trust, said asset did not form part of the
star's estate any longer and assuming that the right conditions
are present, this asset could not in future be attacked to pay his
reported $500 million debt.
In parallel with spendthrift trusts, special
needs trusts are likewise created to ensure that
beneficiaries who are disabled or mentally ill can enjoy the use of property which is intended to be held for their
benefit. Such trusts are extremely useful to parents who wish to
provide for their mentally or physically disabled children whose
disability renders them incapable of sustaining themselves.
Parents would in such cases want to ensure that following their
demise the responsibility for the well-being of their disabled
children is not left solely in the hands of the other siblings.
Instead they have the peace of mind that an impartial and reliable
trustee is managing the trust property with the aim of providing
for the beneficiaries' ultimate protection.
We have recently seen very interesting innovations in Maltese
laws which seek to further safeguard the interests of a beneficiary
subject to a mental or physical disability. Such amendment refers
to situations where the benefit to a beneficiary with special needs
consists in the use and enjoyment of property and it appears that
the value of the trust fund exceeds the disposable portion of the
estate of the settlor. In such a case, if the opinion of the
trustee is that the trust property is not susceptible of division,
sale or reduction to fulfil the claims of a legitimary without
materially prejudicing the interests of the said beneficiary, the
trustee may apply to the Court and the Court may order that the
property not be sold, divided or reduced until the death of the
In such case, the law gives the trustee the additional power and
legal interest to pursue any claim for the reserved portion due to
this beneficiary against any other person and to receive any sum
due in this respect into the trust.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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