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Key features of DIFC Trust Law

Key features of DIFC Trust Law

07 October, 2024

The Dubai International Financial Centre (DIFC) Trust Laws 2018 have undergone further enhancements, solidifying the DIFC's position as a premier jurisdiction for trust establishment. Kenny Curpen, Director of Private Client and Corporate Services, and Leevyn Isabel, Commercial Director - Middle East, delve into the key features of the DIFC trust regime, highlighting its benefits for asset protection, succession planning and wealth preservation.

 

What are the key features of the DIFC Trust Law?

1. Enhanced privacy

DIFC trusts remain unregistered, ensuring a high degree of confidentiality. There's no public record or central registry to reveal sensitive information. While not registered, the DIFC Registrar of Companies can provide a certificate verifying the trust's existence, beneficial ownership, control and beneficiaries upon request.

2. Diverse asset holdings

DIFC trusts can encompass a broad range of assets, from liquid investments like stocks and bonds to tangible possessions such as real estate, art, and intellectual property. These assets can be located both within the DIFC and in other jurisdictions.

3. Digital asset inclusion

The DIFC Trust Laws now recognise 'Digital Assets' as defined by the Digital Assets Law, allowing DIFC trusts to hold crypto assets.

4. Confidentiality

The DIFC's legal framework is designed to protect the privacy of trust information, including details about assets and beneficiaries.

5. Flexible trustee presence

Corporate trustees are not required to maintain a physical presence within the DIFC.

6. Enhanced flexibility

The recent amendments have expanded the flexibility of DIFC trusts, allowing settlors to tailor them more precisely to their needs. This includes retaining powers like appointing or removing trustees, modifying the trust deed and directing investments.

7. Duration & revocation

DIFC trusts can be designed to exist indefinitely or allow the settlor to revoke them at any time.

8. Asset segregation

A key benefit of DIFC trusts is the separation of trust assets from personal assets. This safeguards the trust assets from creditors, legal claims, and financial risks associated with the settlor or beneficiaries. This feature is especially valuable for families with business interests, providing a shield against liabilities from their ventures.

9. Succession planning

DIFC trusts streamline the transfer of assets by outlining clear distribution plans and timelines, often linked to specific ages or life events. This helps avoid the complexities of probate, especially in cases involving cross-border interests or when local succession laws don't align with the settlor's wishes.

10. Tax optimisation

Families can benefit from the UAE's corporate tax regime by establishing 'Family Foundations' (which include trusts) to optimise their global tax obligations.

11. UAE legal recognition

DIFC trusts are recognised under the UAE Family Business Law, reinforcing their position within the UAE's legal framework.

12. Control over heirship

DIFC trusts offer greater control over heirship rights. Unlike foreign laws, DIFC trust law does not recognise heirship claims arising from outside jurisdictions.

13. DIFC courts & arbitration

The DIFC Courts have exclusive jurisdiction over trust-related matters, including administration, arbitration, and disputes. Settlors can opt for arbitration for administrative disputes by specifying so in the trust document.

14. Primacy of DIFC laws

The DIFC's legal framework takes precedence over foreign judgments regarding DIFC trusts. Foreign judgments, especially those related to heirship claims, are not enforceable if they conflict with DIFC laws.

15. Enhanced asset protection

Legal challenges to property transfers into a DIFC trust are subject to a three-year limitation period. Transfers are not invalidated unless proven fraudulent and resulting in insolvency. Creditor claims against the trust are limited to the founder's original interest in the transferred property.

The DIFC trust regime offers a robust and flexible framework for asset protection, succession planning and wealth preservation. By combining privacy, confidentiality, and a strong legal foundation, the DIFC continues to attract global investors and high-net-worth individuals seeking effective trust solutions.

 

How can Ocorian help?

The DIFC trust regime offers a robust and flexible framework for asset protection, succession planning, and wealth preservation. By combining privacy, confidentiality, and a strong legal foundation, the DIFC continues to attract global investors and high-net-worth individuals seeking effective trust solutions.

Ocorian, a registered Corporate Service Provider (CSP) in the DIFC, offers comprehensive company formation, secretarial, accounting and directorship services to support your business aspirations. Our expertise and local knowledge enable us to guide you through the intricacies of the DIFC's regulatory landscape.

To explore our full range of services, visit United Arab Emirates | Ocorian.