Asset protection trusts

Abstract

Since the introduction of the Trusts and Trustees Act Chapter 331 of the Laws of Malta, trusts have been set up for various purposes, including safeguarding and shielding assets from creditors. Although this dissertation is about asset protection trusts, in the first chapter I explained the notion of asset protection and the various asset protection vehicles used both locally and abroad. In this manner I provided a wider perspective of asset protection before proceeding to the more detailed discussion in the following chapters. The second chapter elucidates the features of asset protection trusts and the content of a typical asset protection trust deed. From the information obtained while conducting research at the Institute of Advanced Legal Studies Library at the University of London, United Kingdom, it transpired that although most trust structures provide asset protection, an asset protection trust should contain various features to safeguard the assets held therein in the event of an eventual claim. Due to their nature, asset protection trusts have been put to various uses. In chapter 3 I discussed some of the myriad uses of these trusts both in the private scenario, where trusts are more commonly designed to shield and insulate personal assets from liability risks, and also their development in the commercial world, where asset protection trusts are being used more often in particular for security purposes. Chapter 4 delves into the actions available under Maltese law in the event that a person fraudulently transfers assets in a trust, given that there is a very sharp dividing line between asset protection planning and actions to defraud legitimate creditors, which on the other hand is a criminal offence. I also compared the legislative enactments available in the United States of America and in the United Kingdom in the event of fraudulent transfer of assets in trust. In addition, I also discussed the possible claims a person might have against an asset protection trust and how this may fail in spite of being constituted in a lawful manner. Finally, I discussed the moral aspect of setting up asset protection trusts. Though morality is deemed to be subjective, in cases when others can be harmed, morality is seen as an objective issue. The question whether protecting your assets, even when this is permissible at law has been a bone of contention between practitioners and adjudicating bodies.