A trust is established through the creation of the trust relationship, not through incorporation of a new legal entity.
An express trust will normally require a clear intention to create a trust, identifiable trust property and sufficiently certain Beneficiaries or a permitted purpose. The precise legal requirements depend on the governing law selected for the trust.
Trust Deed
The arrangement is usually documented in a written trust deed.
A trust deed is the principal document recording the terms on which the Trustee holds and administers the trust property. A trust deed will commonly address
the identity of the Settlor and Trustee;
the governing law and place of administration;
the initial trust property and how additional property may be added;
the Beneficiaries, classes of Beneficiaries or purposes;
the Trustee’s investment, management and distribution powers;
whether distributions are fixed or discretionary;
appointment, retirement and removal of Trustees;
any Protector or Enforcer and their powers;
powers reserved to the Settlor or another person, where permitted;
amendment, revocation and termination; and
how the trust property is distributed when the trust ends.
A separate letter of wishes may also be used to communicate the Settlor’s preferences to the Trustee, particularly for a discretionary trust. Whether and how such wishes affect Trustee decision-making depends on the governing law and the trust documents.
Is a Trust registered?
In ADGM and DIFC, trusts are not registered.
A DIFC Trust is a trust whose governing law in the trust deed is specified as being DIFC Law. The trust exists as a legal relationship under its trust instrument and applicable law, with the Trustee holding legal title to the trust property.
A trust governed by ADGM law is not incorporated or registered as a separate legal entity with the ADGM Registration Authority. ADGM’s current guidance describes a trust as a private legal arrangement for which no formal registration is required. Because the trust has no separate legal personality, the Trustee rather than the trust is the legal owner of trust assets.
Transferring Property to the Trust
A trust can potentially hold many forms of property, including shares, cash, investment portfolios, contractual rights, intellectual property, artwork and real estate.
Once the trust is documented, legal title to the relevant assets must then be transferred to the Trustee (who holds the assets on behalf of the trust), unless the Settlor is declaring that the Settlor already holds specified property as Trustee.
The transfer formalities depend on the asset. Shares may require a share transfer and update to the company’s register of members. Real estate may require registration with the relevant land authority. Choosing ADGM or DIFC law as the governing law of the trust does not dispense with those asset-transfer requirements.