Summary: Protecting one’s assets and wealth may be carried out through the formation of a trust or foundation. In deciding which to use, it is important to take into consideration the different elements, that pertain to each and how this would impact the protection of the assets in question.

When deciding which vehicle to use within a particular situation, it is important to consider the distinguishing features between the essential elements of trusts and foundations. In doing so, persons would be able to derive further benefits and protect their assets in a better manner.

Traditionally, trusts and foundations used to pertain to different types of jurisdictions. Trusts traditionally existed in common law jurisdictions, whilst foundations were found in civil law jurisdictions. This is no longer always be the case, particularly in jurisdictions like Malta, where separate legislative frameworks have been developed for both trusts and foundations.  Trusts are governed by the Trusts and Trustees Act (“the Act”), Cap. 331 whereas the law which applies to foundations registered in Malta can be found in the Second Schedule to the Civil Code, Cap. 16.

The Distinction between these Vehicles

The table below highlights a few key differences between trusts and foundations under Maltese law.

These essential distinctions between trusts and foundations must be taken into consideration upon the drawing up of the trust deed or of the deed of foundation to determine the limits, freedoms and rights of the parties involved. Prior to this decision being taken, due consideration must be given to the circumstances surrounding the assets and their trustees or founders.