Trust: the thriving institution of the Anglo-Saxon world

A trust is an arrangement, i.e. a legal agreement under which one person or company, the Trustee, transfers assets into the trust and another person or company, the Trustee, agrees to hold those assets in his or her name for the benefit of other people, the Beneficiaries, on certain terms and with certain powers. The specific terms and powers granted are included in the trust document. Further, the assets of the trust are registered and legally owned by the Trustee and the Trustee has a legal duty to hold these assets and the income derived from them for the benefit of the Beneficiaries.

In addition, as regards the institution of the trust, two important points should be clarified. On the one hand, although the Trustee has legal title to the trust assets and the Beneficiary has title to an interest, it is precisely the title to the interest that has value in relation to the ownership of assets under such an arrangement. On the other hand, as regards the “registered office of the trust”, it is noted that although the trust has no legal personality, it has a local centre of interest, which is determined on the basis of the settlor’s wishes. Indeed, if the settlor has not expressed any wish, various criteria are taken into account, such as the centre of administration of the trust, the place of residence of the trustees, the assets of the trust, the nature of the purposes pursued and the place of performance of the trust’s obligations.

Moreover, it could not be overlooked that the trust is an institution applied mainly in the Anglo-Saxon area. More specifically, under Anglo-Saxon law, a trust is a legal agreement whereby property owned by one person is administered for the benefit of another. In Greek the term is rendered as a trust, but Greek law -like the rest of continental European law- does not know such an institution. Of course, gradually the case law on trusts is increasing, while the existing Greek legislation can respond to certain aspects of trusts. Focusing our attention on the Anglo-Saxon institution it is interesting that the parties to the trust settlor”, who gives the asset for the benefit of another, the “trustee”, who has control of the asset and whose payment is prescribed by law, and the “beneficiary“, who receives the benefits of the asset.

It is clarified that in its external relations with third parties, the trustee appears as a normal rights holder. In other words, it can assign or acquire rights as well as assume obligations. At the same time, however, a variety of problems may arise in the trustee’s internal relations. For example, issues are likely to arise about who comes into the position of the trust or with the definition of powers. Disputes can also arise between the trustees and the beneficiaries.

Still, moving to the Republic of Cyprus, it is particularly significant that the most common form of trust in Cyprus is the Discretionary Trust, which gives the Trustees the discretion to exercise their own discretion as to how and how much the Beneficiaries will benefit. Beneficiaries may be designated either by name or by family class of persons or simply left to the full discretion of the Trustees.

In conclusion, it should be stressed that the institution of the trust corresponds to the legal and economic reality of the Union. For a more detailed description and analysis of the specific institution as well as for a responsible and thorough guidance regarding the establishment, administration or tax planning of a trust, do not hesitate to contact ADVANCED CONSULTANTS S.A. Our experienced and qualified consultant will undertake to settle all your questions and provide you with any assistance you may require in order to increase the efficiency and financial advantages of such a business move.