Cyprus Trusts
Trusts are instrumental in managing and protecting assets, offering benefits that align with financial goals and personal values.
Establishing a Trust in Cyprus
Establishing a Trust in Cyprus is an effective estate planning strategy, governed by the Trustee Law Cap 193, which incorporates principles from the English Trustee Act 1925. Trusts in Cyprus offer flexibility, privacy and control over asset management, while also providing significant benefits such as bypassing forced heirship rules, protecting assets from creditors and potentially offering tax efficiencies.
Why establish a Trust in Cyprus?
There are several key advantages to establishing a Trust in Cyprus:
Avoiding forced heirship rules
Trusts allow for flexible asset distribution, bypassing Cyprus' forced heirship rules.
Privacy
Trusts remain private documents, keeping financial and family matters confidential.
Avoidance of probate
Trusts bypass the lengthy probate process, facilitating smoother asset transfer upon the settlor's death.
Asset protection
Trusts can shield assets from creditors and legal claims, particularly through irrevocable trusts.
Control and flexibility
Trusts allow detailed instructions for asset management and distribution, catering to various scenarios like education funding and charitable support.
When to choose a Trust versus a Will
Trusts
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Offer greater flexibility for asset management during the settlor's lifetime and beyond
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Ensure privacy and bypass the probate process
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Provide robust protection against creditors and ongoing control over distributions
Wills
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Simpler and less expensive to create
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Suitable for straightforward estates
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Retain capital gains tax exemptions and allow inclusion of both movable and immovable assets
Types of Trusts
Discretionary Trusts
Trustees have discretion over distribution.
Fixed Trusts
Specific terms for distributions without trustee discretion.
Revocable Trusts
Can be amended or revoked by the settlor.
Irrevocable Trusts
Cannot be altered once established, offering strong asset protection.
Charitable Trusts
Established for charitable purposes.
Legal framework
Trustee Law Cap 193
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Based on the English Trustee Act 1925, it sets detailed rules for trustee appointments, duties and powers
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Ensures Trusts are administered prudently and in beneficiaries' best interests
Certainties for valid Trusts
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Certainty of Intention: Clear intention to create a Trust
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Certainty of Subject Matter: Precise identification of Trust property
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Certainty of Objects: Clearly identifiable beneficiaries
The step-by-step process of establishing a Trust
Initial considerations
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Define the Trust's purpose
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Decide on assets to include and identify beneficiaries
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Choose a Trust name and a suitable trustee
Drafting the Trust Deed and Letter of Wishes
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Set Trust rules with legal assistance
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Include essential provisions in the Trust deed
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Prepare a non-binding Letter of Wishes to guide trustees
Signature and registration
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Sign and stamp the Trust deed
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Register the Trust with the Cyprus Securities and Exchange Commission (CySEC) and the Cyprus Bar Association
Transfer of assets
Formally transfer ownership of assets into the Trust.
Ongoing management and administration of the Trust
Trustees must manage assets prudently, maintain accurate records, fulfil tax obligations and make distributions per the Trust deed and Letter of Wishes.
Trusts in Cyprus offer a strategic alternative to Wills, providing enhanced control, flexibility and privacy in estate planning. By bypassing forced heirship rules and avoiding probate, Trusts ensure smoother asset transitions and robust protection, aligning with the settlor's specific wishes and benefiting beneficiaries effectively.
Find out more about creating a Cyprus Trust
Contact us to arrange a free consultation to discuss your specific circumstances and find out how we can help you get the very best from your asset management and legacy planning arrangements.