Investors who set up a trust in the Isle of Man benefit from a favorable regulatory environment that combines both a welcoming business regime for investors and highly rated financial supervision policies. The Isle of Man offers a wide range of investment vehicles, not only trusts but also funds and open-end investment companies.
| Quick Facts | |
|---|---|
| Why set up a trust | – wealth or asset protection, – succession planning, – charitable purposes, – tax planning, – medical planning, – educational funding, etc. |
Discretionary trusts | Trustees have full discretion to distribute the trust’s capital as specified in the trust deed. |
Life interest trusts | Beneficiaries receive a predetermined share, with possible access to capital after the trustor’s death. |
| Purpose trusts | Non-charitable, with a minimum of two trustees, often used for asset financing, securitization, or holding shares in a private trust company. |
| Charitable trusts | Created for charitable purposes like poverty relief, education, religious causes, or community benefits. |
| Pension and employee benefit trusts | Used to manage pension funds or provide incentives to employees. |
| Laws governing trusts in Isle of Man | Trusts (Amendment) Act 2015 |
| Trustee duties | – adhering to the trust terms, – act in good faith for the purposes for which they were appointed, – provide information to beneficiaries, follow specific investment criteria, etc. |
| Accountability of trustees | If a trustee breaches their duty of care, they can be held accountable by the beneficiaries. |
| Taxes extemption | – capital gains tax, – inheritance tax, – gift tax, – estate tax. |
| Income tax | – 20% (for residents); Our accountants in Isle of Man can offer guidance regarding income tax. |
| Process of opening a trust | – decide the trust type, – appoint the trustee, – determine the beneficiaries, – create the Trust Deed. |
| Private trust companies – characteristics | Their primary function is acting as a trustee; Can hold both personal and business assets within the trusts; The settlor maintains control over the trust and its management. |
| Advantages of opening a trust in Isle of Man | – tax benefits, – asset protection, – wealth management, – confidentiality and security, – flexibility, – international asset management, etc. |
| Assistance | We can help you open a trust or a company in Isle of Man, as well as in other legal matters. |
Table of Contents
What are the steps for establishing a trust in the Isle of Man?
A trust creation process in the Isle of Man is an official procedure that entails the creation of a structure, the development of its terms, and its formalization. While this process may vary, it is subject to Isle of Man trust laws. Key steps include:
- Determine the aim of the trust and its structure;
- Determine if the trust serves a personal or a business goal;
- Identify the settlor and beneficiaries;
- Determine which party will transfer assets and the beneficiary party;
- Identify trustees (one trustee at minimum is necessary);
- Prepare the trust deed: the legal document containing the administrative guidelines, duties, and rights of trustees;
- Place assets in the trust: the legal ownership shifts from the settlor to the trustees.
What are the types of trusts in the Isle of Man?
The types of trusts most commonly employed in the Island of Man include the following, briefly described in the list below:
- pension trusts and employee benefit trusts: these can be used either to house pension funds or to motivate employees;
- discretionary trusts: this is a common type of trust used in the Isle of Man in which the trustees have full powers for deciding now to distribute the capital and decide the amount received by the beneficiaries; these powers are awarded through the trust deed;
- life interest trusts: one of more beneficiaries receive a pre-determined share for a specified period of time; the beneficiaries can have access to the capital after the death of the trustor;
- purpose trusts: these are for non-charitable purposes and must have at least two trustees; they can be used for asset financing, securitization or to hold shares in a private trust company;
- charitable trusts: can be used for various charitable purposes such as poverty relief, education, religious purposes or other purposes that would benefit the community.
The following video presentation about the trust summarizes its features:
What are the requirements to set-up a trust in the Isle of Man?
- The trust should have an objective in accordance with the law;
- The person who sets up the trust needs to be legally capable of transferring the property;
- Trustees have to act independently and in good faith;
- The trust deed must be legally enforceable under Isle of Man law;
- The property should be determinate and correctly transferred;
- Accounting records should be kept separately by the trustees;
Apart from these, trustees should be subject to regulation by the Isle of Man Financial Services Authority (FSA).
Which documents are required to set up a trust?
- Risk assessments and compliance documentation;
- Trust deed (main legal document of the trust);
- Identity documents of settlor and beneficiary;
- Passport or national identity card;
- Proof of residence;
- Documentation regarding source of wealth/source of funds: sales contracts, business ownership, investment documentation;
- Trustee’s acceptance documentation;
- Document certifying appointment of the trustees;
- Asset transfer documents: deed of transfer, stock assignment or property transfer forms;
What are the uses of trusts in the Isle of Man?
A trust in the Isle of Man will provide trustee services to investors, both for commercial and for personal purposes. Examples of uses for a typical trust include:
- wealth protection and preservation for families;
- succession planning both for businesses and individuals;
- asset protection;
- tax reduction;
- pensions;
- employee benefit schemes.
The following video presentation about the trust summarizes its features:
What is the main legal base of trusts in the Isle of Man?
The Trusts (Amendment) Act 2015 was enforced in order to provide changes to the Trustee Act 1961 that made it mandatory for trust corporations to have two individuals who will act as trustees in certain cases. The Amendment also brought forth a number of other changes, such as the vesting within a perpetuity period or the manner in which certain foreign law exclusions concerning trusts were governed by the law of the Isle of Man.
The Act made it so it will not be compulsory to appoint more than one trustee, in those cases in which only one was appointed initially. Also, it is not mandatory to fill up a number of trustees. Also, the rule against perpetuities for future dispositions was abolished.
What are the trustee services in the Island of Man?
Investors who open a trust in the Isle of Man will offer their services through an Isle of Man based corporate trustee. The main duties of a trustee include the following:
- know and observe the terms of the trust (an exemption applies when this action is directed by a court);
- protect the trust property and separate it from their own assets or those included in other trusts;
- act in good faith and only for the purposes for which they were designated;
- provide information to the beneficiaries when they request so;
- follow certain investment criteria when making trust investments.
How private trust companies work in the Isle of Man?
Trust companies are popular in the Isle of Man and they are incorporated for the sole purpose of offering trustee services.The company is incorporated for the purpose of acting as a trustee and it can hold both personal and business assets. Commonly, the settlor is the one who will incorporate the trust company and will use it for asset protection and management purposes.
The private trust company allows the settlor to remain in control of the trust. This also means that the company can remain under family control, where an option is to include members of the family or trusted financial advisers in the company’s board of directors.
We invite you to contact us for more information and support on how to set up a trust in the Isle of Man.