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Trusts

A Trust is an arrangement for the holding and administration of property under which property or legal rights are vested by the owner of the property (the settlor) in a person or persons (the trustees). The trustees then hold the property for, or on behalf of, other persons (the beneficiaries). It is essential that the transfer is gratuitous otherwise the transaction takes on characteristics of some other legal entity.

A Trust may therefore be defined as an equitable obligation which binds the trustees to hold and deal with the true assets for the benefit of the beneficiaries in accordance with the terms of the Trust. Acting as trustee, MATCO administers the Trust assets and distributes them to the beneficiaries in accordance with the terms of the Trust Deed and the proper law of the Trust.

The flexibility and protection afforded by Trust arrangements are such that they have become an important part of long-term wealth management.

Through the use of Trusts, it is often possible for family assets to be preserved over succeeding generations, substantially free from taxation, probate requirements, succession laws, expropriation and foreign exchange controls. There is no requirement in Mauritius to register Trusts, thereby maintaining confidentiality.

How is a Trust created?

Trusts in Mauritius are governed by the Trusts Act 2001. A Trust can only be created by an instrument in writing which should state its object, subject, intention,  duties and powers of the trustees. It can be formed by a resident or non-resident of Mauritius. There is no register of Trusts in Mauritius, nor is there any disclosure of beneficial owner to any authority.

A Trust created by written documents will generally take two forms:

  • Settlement: This form of document will be entered into, and signed, by both the settlor and the trustee, and so provide clear evidence  of the intentions of both parties and of the agreed obligations assumed by the trustee;
  • Declaration of Trust: This form of document is entered into and executed by the trustee only, and records that the trustee has received certain property, specified in the document, to hold upon the terms set out in the document.

It is sometimes more convenient to create a Trust by Declaration of Trust rather than by settlement, for example, the settlor may not be available to sign the document when it is prepared.

Types of Trusts

Most offshore Trusts fall into four categories:

  • Private: Including discretionary, accumulation and maintenance, life interest and fixed interest Trusts;
  • Corporate: Including pension and employee benefit Trusts;
  • Charitable: Solely for the benefit of charitable organisations;
  • Purpose: Trusts with no beneficiaries that are established for purposes that are certain and responsible.

Discretionary Trusts

The most common and flexible type of offshore Trust is the Discretionary Trust and it is used in wealth protection and tax planning.

The Discretionary Trust is commonly used when, at the time the Trust is established, no decision has been taken as to what portion of the Trust’s income and capital should be reserved for each beneficiary, and when it is desirable to maintain flexibility in that respect. Under the provisions of a Discretionary Trust, the trustees are given the power to select which person or persons are to benefit from the Trust and the extent of such benefit. They may also have the power to decide whether to distribute income or accumulate it. The trustees very often have the power to add or remove beneficiaries and this gives considerable flexibility to the Trust.

Whilst the trustees of the Discretionary Trust will usually have the power to determine the beneficiaries of both the capital and income of the Trust, and the amounts which they are to receive, the settlor will give the trustees guidance as to how they should administer the Trust, both during the settlor’s lifetime and after his death; which will be set out in the “letter of wishes”.  This letter can be varied from time to time during the settlor’s lifetime to meet changing circumstances.

A Discretionary Trust can also include extensive investment powers to meet the requirements of international clients and it can hold all manner of assets. As this type of Trust is very often used in combination with a Global Business Company, there will be power for the trustees to establish wholly-owned companies, notwithstanding this, the terms of the Trust may provide that the trustees do not need to interfere in the management of such companies.

Protector

The Trust Act permits the appointment of a Protector, who owes fiduciary duty to the beneficial owners. Unless otherwise provided in the Trust Deed, the Protector can remove the trustee and appoint new or additional trustees. The Protector may also be the settlor, the trustee or the beneficiary of the Trust, but in his capacity as Protector he is not accounted or regarded as a trustee.

Main features of Mauritius Trusts

  • Confidentiality of trustee deliberations, identity of settlor and beneficiaries;
  • Possibility to establish letters and memorandum of wishes;
  • Anti-forced heirship roles;
  • Migration of Trust possible;
  • Concept of managing and custodian trustee (up to four trustees);
  • Charitable Trusts are exempt from tax.