Cyprus: Securing Your Children's Future With A Cyprus International Trust

Recently, parents have become more sophisticated in investing their wealth to safeguard for their children's future.

More often, parents are willing and determined to start saving money for their children as soon as their baby is born (sometimes, even before the baby's "arrival"). Typically, a parent's primary concern is being able to pay their child's educational costs and/or ensuring a better start for their children when they grow up and begin to purchase property or even launch their own business.

One way to accomplish their goals is to set-up a Cyprus Investment Trust ("CIT"). Trusts have been widely used as an effective tool to maintain and grow one's assets for a quite some time now. A trust can function like an investment fund which allows a trustee to manage its assets for the good of the beneficiaries.

Trusts are also a great way for parents to ensure their disabled children are properly taken care of during their lifetime (in such cases assets/property which is held in trust may not be necessarily released to a disabled beneficiary, though such a trust will guarantee that a disabled child is properly provided for his/her needs during his/her lifetime). In any case, parents may rest assured that even in the unfortunate case of death, divorce, or bankruptcy, assets placed into a trust for children will be protected and used for the benefit of the children as prescribed in the trust instrument.

The Advantages of Setting-Up a CIT

Setting-up a Cyprus International Trust for children is easy and allows parents to tailor it to fit their unique circumstances. Parents can work with specialized lawyers to draft a tailored trust instrument that ensures their children get the best out of – steady income, protection of assets/property, predictable tax regime, immunity against ungrounded claims and full confidentiality.

If properly executed, a trust is a very convenient vehicle for maintaining and growing wealth in a tax-advantageous manner. In fact, there are many advantages to having a trust. Assets which are transferred to a trust are held and managed in full confidentiality – you do not even need to indicate a particular name of a beneficiary but rather to define a class of persons who will be beneficiaries – i.e. son from the first marriage, wife, etc. Moreover, transferring assets to a Cyprus international trust would protect the assets from any claims brought by the State of the settlor's residence.

Wealthy parents may be willing to set up a trust for children whereby the parents may distribute the inheritance upfront among heirs as they deem appropriate as an alternative to a Will. In such a case, the parents can guarantee that their children will inherit their stakes without a probate period applicable in their home jurisdiction, free of taxes attributable to the inheritance in their home country, as well as free of other claims related to the assets/property transferred to the trust.

Another advantage of creating a Cyprus international trust is to protect the assets from a beneficiary's negligence. To this end, parents may hire a professional manager to act as the Trust Manager and authorize him/her to control and manage family assets/property in a manner that will ensure proper functioning and use of the inheritance after parents' death (with or without immediate release of assets/property), as well as a steady income for the children. Parents have the option and discretion to include a clause in the trust that could limit the use of such income to financing only certain things defined by a trust instrument or subject to satisfaction of pre-defined criteria.

While the benefits of setting up a trust for children are many, there are important legal matters to consider in setting-up the trust. One such issue is choosing the right jurisdiction that will suit your needs. Cyprus is certainly one of the best jurisdictions to set up a trust for children given that Cyprus is an EU member, has progressive legislation and liberal tax and financial regulations. The Cyprus law that governs trusts and international trusts has evolved significantly over last couple decades. Cyprus International Trusts are governed by the 1955 Trustees Law, Cap.193, as well as the International Trusts Law of 1992 (as further amended in 2012).

How does a CIT work?

According to the Cyprus International Trusts Law, in order to set up a trust for children in Cyprus the following conditions must be met:

  • a settlor (parent) either natural or legal person, must not be a resident of Cyprus during the calendar year which precedes the year of trust creation. A settlor must have legal capacity to transfer assets/property to a trust, i.e. be at the time of transfer of full age and of sound mind under the law of the country of which he/she is a resident; and
  • child/children (even if not yet born at the moment of a trust creation) – beneficiary(ies), either an individual or legal entity(s), must not be resident (s) of Cyprus during the calendar year which precedes the year of trust creation; and
  • at least one of the trustees must be a Cyprus tax resident at the moment of a trust's establishment and for the duration of it;
  • a trust deed must be stamped in Cyprus; details of a trust instrument, i.e. name of a Cyprus international trust, name of trustee and date of trust must be registered with one of three authorized regulators.

A trust may also involve a guardian or protector, a person other than the trustee to whom powers of any nature are conferred by the trust instrument. A guardian's / protector's role, powers and authorities are regulated by the trust instrument. Although appointing a protector or a guardian is not mandatory, it can be helpful for a parent who may not have the time or know-how to manage the trust themselves.

A valid Cyprus trust must clearly state the express intention of setting up a trust for children. It further must identify the asset/property which is subject to transfer to a trust. A trust must also ensure that the beneficiaries (children, even if unborn at the time of the trust's creation) are ascertainable or identified at the moment of a trust's establishment. Provided a Cyprus international trust meets the foregoing criteria it shall not be void or voidable, and no claim may be made in respect thereof the assets/property unless and to the extent that it is proven to the satisfaction of the Court that the international trust was made with the intent to defraud creditors of a settlor at the time of the transfer of his/her assets to the trust. The burden of proof lies with creditors.

It should also be noted that parents may themselves play a more active role in the Trust by becoming a co-trustee and a member of a trust's board and play a visible role as a guardian and/or protector and/or executor. For instance, the board of directors can consist of a settlor, his/her spouse, any other trusted persons alongside a professional director that will ensure control by a settlor at board level in addition to voting rights as a trust member.

However, since the day-to-day activities of a trust may be quite challenging and require more time and effort than a settlor may be able to devote, if a settlor chooses, s/he may delegate all matters to an experienced provider of trustee and fiduciary services (as a rule, such services are provided by experienced Cypriot law firms) once a trust has been established.

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
Shanda Consult Ltd
AGP Law Firm | A.G. Paphitis & Co. LLC
AGP Law Firm | A.G. Paphitis & Co. LLC
Michael Kyprianou & Co LLC
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Shanda Consult Ltd
AGP Law Firm | A.G. Paphitis & Co. LLC
AGP Law Firm | A.G. Paphitis & Co. LLC
Michael Kyprianou & Co LLC
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions