A trust is a legal agreement between the individual creating the trust (the settlor) and the trustee (the person/institution named to manage the trust assets). The trustee holds legal title to the trust assets for the benefit of one or more trust beneficiaries. The trust may be established and become operative either during one's lifetime (inter vivos trust) or on one's death (testamentary trust), thus lying dormant until one's demise. The establishment of a Malta trust ought to be given due consideration when deciding on one's optimal wealth planning strategy. To this end, Malta trusts can be employed for various purposes, including asset protection, estate or tax planning, as a commercial tool, or for testamentary usage. A trust, therefore, constitutes a flexible tool that one can tailor to his/her needs. It affords management, control and certainty.

The Trusts and Trustees Act regulate the establishment and administration of trusts in or from Malta. Under Malta trust law, a trust may be created in any manner - by unilateral declaration, by an instrument in writing including a will, by operation of the law or by a judicial decision. In addition, a trust may address several issues, including:

• the efficient management of assets if one passes away and the beneficiaries are minor children or otherwise not up to the responsibility of handling their estate;
• the protection of an individual's privacy; and
• in the case of an inter vivos trust, the trustee can manage the property for the settlor while he/she is alive, providing a way to care for the settlor should he /she become disabled. The same result cannot be achieved via a will, given that such an instrument becomes operative only upon one's death.

Our law provides for spendthrift trusts, which can be employed to avoid the spendthrift getting through his inheritance by wasting it and leaving his beneficiaries with nothing. Likewise, our law also provides for the accumulation and maintenance of trusts whereby a wealthy parent may wish to feed his children and grandchildren to achieve particular goals, such as the acquisition of property or proper education of their choice. Outright donations or gifts offer no means of ensuring that the assets are used for their intended purpose. Consequently, by settling assets into a trust, specific provision can be made by which the settlor's objectives can, if possible, be guaranteed.

Trusts afford an administrative bridge from one generation to another that other means cannot provide. Within this remit, a conviction could help in this case to ensure continuity of ownership and asset management in complex situations. Looking at the assets themselves, they are afforded protection from external attacks. Trusts could also hold the collective ownership and control of family assets, thus generating liquidity without putting other assets at risk. Beliefs can be very simple, intended for limited purposes, or can be pretty complex, spanning two or more generations, providing protection from beneficiary creditors, and displacing a will as the primary estate planning vehicle.

Malta trust law can apply to several commercial scenarios within which the use of trusts would attract more favorable treatment. These include security trusts, unit trusts or collective investment schemes, and securitization. One of the great attractions of the faith for the transaction planner designing a business deal is the convenience of absorbing into the ground rules for the business deal those fundamental principles of fiduciary law that protect trust beneficiaries. These attractions have made the trust a viable alternative to other devices, such as contract arrangements and incorporation, whenever the relationship to be established is too delicate or too novel.

Trusts can also be validly used in aircraft ownership structures, given that the pertinent legislation provides for partial, fractional, joint, and trustee ownership.