Registration of family trust funds in the UAE, in the DIFC and DMCC FEZ
The adoption of new trust laws in the UAE has created favorable conditions for businessmen who want to protect their capital from claims of third parties and ensure its inheritance in the future in the interests of their family. Dubai is the second of the country's 7 emirates (after Abu Dhabi) to have a modern legal structure for a UAE trust. New laws on trusts and foundations (No.14 of the Emirate of Dubai from 2017 and No.4 DIFC Free Zone from 2018) have significantly expanded the possibilities of managing private wealth within the framework of ordinary and Sharia law. Citizens of other states can also take advantage of these laws by opening a family trust in DMCC or DIFC free zones.
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Family trust: what it is and what it is for
A trust fund is a legal structure designed to ensure the custody of the founder's assets and property, their management, and the distribution of income and the assets themselves among the beneficiaries. It operates on the basis of an agreement, the parties to which are:
- a founder (grantor) who owns movable and immovable property, cash and other assets that are the subject of a trust;
- trustee or manager - ownership and management of the founder's assets are transferred to them;
- beneficiaries - persons selected by the founder to receive the income and assets of the foundation. They have the right to demand from the manager the proper performance of the duties assigned to them.
A family trust is a special formation with a separate legal personality, the beneficiaries of which are the family members of the founder.
What is a family trust for
A family trust can be set up for a variety of purposes. The main ones are:
- ensuring the financial future of the family, distribution of income and assets of the founder among the heirs when the founder becomes incapacitated or after the founder's death. This makes a trust fund a good alternative to a will, since the property passes into the ownership of the heirs immediately - without a six-month period and additional costs;
- preserving the welfare of the family, protecting assets from the claims of former spouses, business partners, creditors or government agencies, since when a trust fund is established, ownership of the subject of the trust is transferred from the owner of the assets to the trustee;
- protection of capital from being wasted by heirs who do not know how to properly manage money. In such cases, the contract provides for the frequency and amount of allocation of funds to them;
- confidentiality of the information on distribution of property and assets after the death of the founder. Unlike inheritance by will or by law, this information is not subject to public disclosure.
Family Trust in UAE, Dubai
Favorable conditions for the operation of family trusts and foundations owned by foreign citizens have been created in Dubai today. You can register a fund in this emirate of the UAE in two free economic zones at once - DIFC and DMCC.
Family Trust in DMCC and DIFC: Features and Benefits
The registration of a trust in Dubai is governed by Law 14/2017, which is binding on the entire territory of this emirate. In addition, the Dubai International Financial Center (DIFC FZ) has its own trust law 4/2018, which makes some difference in the process of creating a fund in different FEZs. Therefore, when choosing a jurisdiction for the fund registration, it is necessary to take into account the law, which is more suitable for the specific circumstances and purposes of creating a trust.
The features of family trust funds registered in Dubai include:
- the presence of legal personality, which makes them similar to companies that do not have shareholders;
- the impossibility to conduct commercial activities at the discretion of the manager, except for the one provided by the agreement with the founder to support the operation of the fund and achieve its goals;
- confidentiality of information about the assets of the fund and its management activities;
- optional physical presence of the founder on the territory of the FEZ. In this case, the management of the fund must be carried out by a person (natural or legal) registered in the corresponding free zone.
Registration of a trust in Dubai offshore zone (DMCC or DIFC) has the following advantages:
- permission for one hundred percent ownership by a foreign citizen or company;
- the possibility of creating a trust with any minimal capital;
- full tax exemption;
- high degree of protection of the founder's assets;
- high level of anonymity.
How to set up a trust fund in Dubai
To open a family trust fund in the DMCC and DIFC free zones of the Emirate of Dubai, you must:
- separate from your ownership the assets that are supposed to be transferred to the trust;
- determine the type and structure of the trust fund, clearly define its goals and acceptable ways to achieve them. If necessary, restructure assets;
- choose a suitable jurisdiction and trustee;
- create trust agreement (contract);
- prepare a package of necessary documents for creating a family trust. The list of documents depends on the type of fund and jurisdiction;
- transfer assets to the trust.
Cost and terms of registration of a trust in the UAE
Сreation of a family trust requires painstaking work, taking into account the individual characteristics of the business and the structure of assets transferred to management. Here you need to take into account many nuances from your goals and needs to the specifics of the legislation in force in a suitable jurisdiction. All this affects the costs required to register a fund. The whole registration process takes about two months if the work is done by professionals.
If you want to open a family trust fund without delays and in the optimal time - contact the specialists of Dynasty Business Adviser!
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