A Trust comes into existence when an individual or a legal entity (Settlor) gratuitously transfers the legal ownership of assets (Trust Property) to another person or persons (Trustees) to hold for the benefit of other person(s) termed as beneficiaries of for a specific purpose. The Trustees have an equitable obligation, which bind them to hold and deal with the trust property in accordance with the terms of the trust. The trustee is charged with the fiduciary responsibility for protecting and managing these assets in the best interest of the beneficiaries. The DIFC Trust Law provides a robust and internationally recognised legal framework, offering flexibility for trust formation and operation.

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Trust in DIFC is created by any one of the following methods:

• the transfer of property to another person as trustee during the settlor’s lifetime, or by will or other disposition taking effect upon the settlor’s death,

• by the transfer of property from one trust to another,

• by declaration by the owner of identifiable property that he or she is holding the property as trustee,

• by the exercise of a power of appointment to do so in favour of a trustee, or

• by way of an instrument in writing including a will or codicil.

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DIFC Trusts are not required to be registered in the DIFC (it is optional). The DIFC Registrar of Companies can issue a certificate under Article 8 of the DIFC’s Operating Regulations to a trustee evidencing the status of a DIFC trust or its beneficial ownership, control or beneficiaries.

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Requirement for creation of a DIFC Trust

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A trust is created if:

• the settlor has the capacity to create a trust;

• the settlor indicates an intention to create the trust;

• the trust either:

  • has a definite beneficiary;

  • is a charitable trust; or

  • is a non-charitable purpose trust;

• the trustee holds or has vested in him or it property for the benefit of a beneficiary or for a purpose;

• the trustee has duties to perform; and

• the same person is not the sole trustee and sole beneficiary.

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Charitable Trust

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A charitable trust may be created for the relief of poverty, the advancement of education or religion, the promotion of health or art, the protection of the environment, or any other purposes which are beneficial to the general public.

 

Non-charitable trusts or purpose trusts

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A trust may be declared by trust instrument for a noncharitable purpose, including the purpose of holding or investing in shares in a company or juridical person or any other assets constituting the trust property if:

• the purpose is possible and sufficiently certain to allow the trust to be carried out;

• the purpose is not contrary to public policy in the DIFC or unlawful under the laws of the DIFC; or

• the trust instrument specifies the event upon the happening of which the trust terminates and provides for the disposition of surplus assets of the trust upon its termination.

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Trust Assets: What can be held in a DIFC Trust?

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• Cash

• Investments, securities, stocks, shares, bonds, and other financial instruments

• Real estate

• Other valuable property such as artwork, jewellery, intellectual property, and any other valuable assets.

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Key features of DIFC Trust

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• Confidentiality – DIFC Trusts are unregistered trusts and there is no public record and information are kept strictly confidential.

• Asset Protection & Preservation of Wealth -Trust assets are segregated from personal assets, protecting them from potential creditors, legal claims, and financial risks associated with the settlor or beneficiaries.

• Succession Planning - DIFC trusts facilitate succession planning by clearly defining how and when assets are distributed, specifying conditions such as the beneficiary reaching a certain age. It has defined distributions plan for specific purposes like education expenses or buying a first home.

• Holding of virtual assets - As per the Digital Assets Law DIFC Law No. 2 of 2024, a trust can also hold virtual assets. As per the law, a digital asset is intangible property and is neither a thing in possession nor a thing in action.

• DIFC Courts’ Jurisdiction - Judicial proceedings in matters of direction, administration, arbitration, and dispute are governed by the DIFC Court.

• Settlor powers – The settlor can retain some powers like appointing or removing trustees, modifying the trust deed and directing investments.

• Heirship Rights - An heirship right conferred by foreign law in relation to the property of a living person shall not be recognised as affecting the ownership of immovable property in the DIFC and movable property wherever it is situated. DIFC trust law does not recognise heirship claims arising from outside jurisdictions.

• Flexible and customizable structures – DIFC Trusts can be tailored for business or personal needs and can appoint protectors, advisors, or even specific clauses in distribution methodology.

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