Forms of Trust
The most common form of trust in Gibraltar is the discretionary trust. Assets held within a discretionary trust are held for the beneficiaries, but the beneficiaries’ entitlement to any benefit is contingent upon the discretion of the trustees.
The Settlor of a discretionary trust will normally prepare a letter of wishes which will set out how he would like the trustees to deal with certain matters within his lifetime. Whilst ultimate discretion still remains with the Trustee this gives guidance to the Trustees who will have regard for the wishes of the settlor. The letter can be amended as necessary throughout the life time of the Trustee
Life Interest & Interest in Possession Trusts
A beneficiary’s entitlement can be limited to the right to receive trust income or occupy trust property, so that the underlying trust capital is preserved within the trust; trusts of this sort are known as life interest or interest in possession trusts. Generally the trustees in such trusts must pass on the income to the beneficiaries as it arises (less any expenses).
Settlor Interested Trusts
This term is used where the settlor of a trust, or spouse or civil partner are also a beneficiary of the trust. A Settlor Interested Trust can be either a Discretionary Trust, an Interest in Possession Trust or an Accumulation and Maintenance Trust
Accumulation and Maintenance Trusts
Under an Accumulation and Maintenance trust, Income that is earned by the assets of the trust may be accumulated and added to the trusts capital. The income and capital will be due to named beneficiaries. Whilst the trustees to dot have discretion over who receives income and capital, they may exercise discretion as to whether to pay. Such arrangements are often beneficial in planning for the succession of wealth where the beneficiaries are minors.