United Arab Emirates: The Hague Convention And Living Trust

Last Updated: 3 August 2018
Article by STA Law Firm
Most Read Contributor in United Arab Emirates, July 2018

Testamentary Vs. Living Trust

Time is an unchanging constant throughout our world. Forever moving in one direction, pushing us all into the hazy future. There is little exact certainty in what we plan for in the longer term, and nowhere is this more apparent in law than in living trusts and testamentary trusts. These laws exist precisely to assure individuals in this uncertain world. No one is aware of when their time will come, and once they are gone, there is very little they can do to impact the world and carry out their final wishes. However, Living Trusts and Testamentary trusts are two such things that will stand beyond an individual's passing.

Overview of living and testamentary trusts

In the case of living trusts, these allow for individuals to plan for their futures, and also the prospects of those who remain when they are gone, while testamentary trusts do not concern themselves with the individuals' future, but rather where and how their estates will be divided when the time and need arises. Living trusts bring to fruition during an individual's life. Their estate is defined, and they can make use of what they wish from their estate. It is in opposition to testamentary trusts which only deal with the issue of the splitting of an estate after death. In general, both of these allow for some level of certainty and assurance in this one aspect of our lives. It can be quite a comforting idea when one thinks about it.

Testamentary trusts are applicable when an individual wish to leave others certain assets, though the time they wish to transfer assets has not yet arrived. Instead, it is often after the individuals' death when their estate will undergo division among the successors. Testamentary trusts are irrevocable, which means that one cannot alter them without the permission of the testator. It also implies that after the death of the testator, there can be no alteration of the testamentary trust. The testator begins the process by first producing their last will. In this document, they will include the fact that upon their death, they would want the trust to be set up. There are three parties involved in a testamentary trust. These are as follows:

  • The grantor/trustor (an individual is also known as the testator in the case of a testamentary trust)
  • The trustee
  • The beneficiary

In this arrangement, the testator is the producer of the trust. As previously mentioned, they begin by producing their last will, which would therein outline the beneficiary party. The trustee is the individual appointed by the testator to proceed with the processes required to set up the trust, and the beneficiary is the individual or individuals who will be receiving benefits from the trust. Itself consists of the estate of the testator, and the trustee, who may or may not have its name in the testators will, shall be responsible for managing that trust up until a time when they are no longer required (when the beneficiary can take over the trust). The trustee can choose to execute the will in what manner they deem to be appropriate, though some jurisdictions allow for more specific instructions from the testator to be issued. However, the general idea is that the trustee must watch over the trust and the last will of the testator. While specific countries will have their requirements for a will to be produced and different laws that dictate testamentary trusts, (such as the UK Trustee law of 1925. It dictates what a trustee can and cannot do) the original basis for the idea of testamentary trusts comes from the English common law system and the concept of equity.

Equity involves the holding of goods for another until both the products and the benefactor are ready to be united. Due to the concept being one that originates from the universal law system, it is one which has not found its way to civil law jurisdictions. Of late some European countries have adopted the concept of trusts and these including the likes of Italy, Malta, and Luxemburg to name a few.

The Hague Trust Convention

An essential piece of legislation about trusts is the Hague Trust Convention. There is a total of 14 signatories of this convention, including the US, Canada, UK, the aforementioned European countries, Australia and more. This convention provides power to a trust produced within a nation that approves of the practice and ensured that the nation interprets it as it was initially meant to be construed in its country of origin by both signatories and non-signatories of the convention. Coincidentally to this point, the agreement also pushed to the forefront, the idea of trusts, to a significant number of (particularly civil law) countries to whom the concept would have been a foreign one. The introduction of The Hague Trust Convention has meant that civil law countries will now at the very least, be able to recognize the concept when they see it in action. A straight rejection will be very unlikely, and with the idea now being more widespread, the plan may stick and be adopted by some of those countries themselves, as was seen with the case of Italy and Malta.

The convention does specify certain aspects of a trust, such as the fact that for it to receive recognition, it must be produced voluntarily and must present in writing, as per Article 3 of the convention. Beyond this, according to Section 4, the agreement does not encapsulate validity of wills and their production, as this is seen as a preliminary issue to trust itself, and also the matter of intentions themselves are a separate topic, governed by their different laws and conventions.

Chapter three of the convention relates entirely to the recognition of trusts. Article 12 confirms that a trustee may do with trust as he is entitled to do so under the laws of the state the trust started under, and Section 11 is a general overview of the idea that trusts should receive recognition as under the jurisdictions.

Chapter 4 concerns general clauses of the convention and Article 15 lays out a few exceptions to the issues and matters at hand. The limitations involve other laws which may impact the validity of what is mentioned in a trust. It includes, as indicated in the article, trust issues regarding minors, who may not be capable of receiving what is for them in a trust, issues regarding succession and marriages, and more.

Beyond this, Chapter 5 discusses some of the final clauses of the convention. Among these clauses are Articles 26-29 explain that it will be possible for any member of the Hague Conference regarding Private International Law, to become signatories of the convention if they should so, please. It is under discussion that the processes required should a party decide to denounce the meeting. However, the agreement is not one which concerns itself with an overly complicated or controversial matter, and as such, the clause is likely only present for the sake of it being present as it would likely be in any convention. It provides freedom to states that agree, should they then find flaws or disagreements with the matters and the way we deal with these conventions.

Once again and most importantly though, the beneficiary, as the individual who is to receive from the trust, will be the end goal for the trustee. There may be occasions when the recipient is very young or is not in a state to be able to receive from the trust. If this is ever the case, it is the responsibility of the trustee to ensure the trust is secure, and in time, when it is possible, to pass on the trust to the beneficiary.

Comparing the trusts

A living trust is also famous as Inter vivos trusts. These are trusts that are made during an individual life and allow for assets to be built up in the individual's estate. The individual can access this trust throughout their life and use what they want to or need to. However, upon the individuals' death, the trust will be split between those mentioned. This form of trust is similar to testamentary trusts in that they take full effect upon the end of an individual. Generally, the same laws and legislation apply to living trusts that apply to testamentary trusts, as they are both defined as trusts. The Hague Trust Convention and the idea of recognition being given to these trusts as they would be within their original country of origin still applies to living trusts, and the more specific legislation regarding wills and trusts are within their country of origin. However, there are most definitely differences between the two types of trusts in the way the trust built and split. Some of those differences will now discuss in more depth.

One difference is that a living trust can be revocable, unlike a testamentary trust. As such, it can change the testator sees fit during their lives. However, it is important to note that whether a living trust is revocable or not depends on what the testator wishes for it to be. However, the flexibility that this offer is something that a testamentary trust cannot provide.

One stage that a testamentary trust passes through during the process of an estate division is known as the probate. The probate stage occurs after the individuals' death when the will must go through the probate court proceeding. This court proceeding is one which can be quite lengthy and can take between six to nine months to complete the operations. The process is intended to ensure the validity of the will before the estate is divided. A living trust is not needed to go through the probate stage for the estate. It saves time for all of the parties involved and can look upon as a significant advantage to forming a living trust. However, some may see it as making a living trust less secure than a testamentary one, though this will more often than not be false.

One interesting point that one may consider the matter of trusts is the privacy of the case. A testamentary trust is, of course, based on the last will of the testator. Once the individual has passed away, the intention is to be made public and the assets split. There is no privacy in this form of trust, as the law stipulates that it will be made public. It is both a good thing and a bad thing. On the one hand, once a will is open and has been through probate, there can be no denying the facts of the will. However, with it going public, other issues may arise, since all those who will be receiving assets will know what all others will be obtaining.

Now while this may be irrelevant from a legal standpoint and may seem like something more fitting of a TV drama show, it is still a factor which we should consider. It is because the privacy issue is only an issue for testamentary trusts. Living trusts though are not made public, and this can and will be seen by many as the ideal path to take. It is important to realize that when a will goes public, it will be a public document that any will be able to view. It includes both those included within the will, and also the general public. Here is where the more significant issue will likely arise for most, as the will produced by a recently deceased may not be a document that one would want to share.

Conclusion

As a whole though, the primary international rules regarding trusts, both testamentary and living, are the same for both cases. The Hague trust convention is this legislation, and it pushes primarily for the recognition of trusts by a more substantial number of nations, as it is an English common law and equity law principle which will be entirely foreign to civil law countries. Beyond this law, trusts under the governance of rules of the nations of the creation of trusts. For example, the aforementioned, UK Trustee Law of 1925 is UK specific, and no international laws are covering the matter. Testamentary and living trusts, while similar, have their apparent differences. They both have their benefits and disadvantages, but in the end, they share the same goal of distributing the assets of a departed individual. Both achieve this, though their means may vary slightly.

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
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
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