Trust setup

In the UAE, it is possible to set up a trust in:

• the UAE mainland – an onshore trust (legal entity)

• DIFC or ADGM in accordance with the rules of the relevant free zone based on the principles of English common law – offshore trust (a set of legal arrangements comprising relations between the trustee, the beneficiaries and the property under the trustee’s management; not a legal entity)

The Trust Deed of an onshore trust, along with any transactions involving onshore trust property, are registered with the UAE Ministry of Finance, although this register remains non-public. Conversely, the Trust Deed of an offshore trust, as well as transactions involving offshore trust property, are not subject to registration.

Disputes arising from the management of onshore trusts are considered by the courts of the UAE mainland, where Sharia law is applied. In contrast, disputes stemming from offshore trust management are considered by the DIFC and ADGM courts, adhering to the regulations of the respective free zones and the principles of English law

Establishing an onshore trust involves drafting of a Trust Deed, which outlines the terms and conditions of the trust. This document includes the trust’s purpose, details about its beneficiaries, a description of the trust property, its duration, the trust’s name, and the powers of the trustee.

After drafting the Trust Deed, the trustee or settlor must register it with the UAE Ministry of Finance’s Registry of Trusts and acquire a certificate of registration.

Establishing an offshore trust commences with the preparation of a Trust Deed, outlining the trust’s terms and conditions. This document includes details such as the trust’s purpose, beneficiary information, property description, duration, trust name, and trustee powers. Additionally, the offshore Trust Deed specifies that the trust is governed by the rules of DIFC or ADGM.

Unlike onshore trusts, offshore Trust Deeds do not need to be registered in the free zones.

For both onshore and offshore trust arrangements, the parties involved include:

(1)  the settlor of the trust

(2)  the beneficiaries, and

(3)  the trustee.

The settlor of a trust is the individual or entity that establishes the trust and contributes assets to it. The law requires the settlor to have legal capacity, can be an individual or a legal entity. Within the Trust Deed, the settlor often retains significant control, including the right to:

• fully or partially terminate the trust
• alter the trust’s purpose
• modify the terms of the Trust Deed
• add or remove beneficiaries or adjust their rights
• appoint or remove trustees
• modify the obligations or powers of the trustee
• provide instructions to the trustee regarding the management, operation, investment, or disposal of trust assets

Beneficiaries of a trust are persons or classes of persons authorized by the Trust Deed to receive the trust property under specific conditions. A settlor may also be a beneficiary of a trust.

A settlor may also be a beneficiary of a trust.

Trustee – is a person responsible for managing the trust property. It can be either a legally capable natural person or a legal entity possessing an appropriate license.

Key powers of the trustee include the right to:

• manage, use and dispose of trust property and open bank accounts (unless restricted by the terms of the Trust Deed)
• exercise discretionary powers with respect to the distribution of the property to beneficiaries (the Trust Deed may contain such provisions)

Trustees are also required to:

• preserve the trust property and its value
• act in the best interests of the beneficiaries or use due diligence to accomplish the purpose of the trust

The Trust Deed of an onshore trust is submitted to the UAE Ministry of Finance for registration, but the details are not made public. The Trust Deed of an offshore trust is not submitted to any authorities and remains confidential.

Unlike foundations, trusts in the UAE have no restrictions on asset ownership.