It was great to hear the issue of disability trusts raised in a recent Bondiplus programme on TVM. The Labour Party has picked on this legal institute to promote one of its policy positions on the disabled.

A speaker representing the disability sector clearly had no idea what he was talking about- Max Ganado

It is these kind of events that propel this important legal institute to a level of higher importance and better understanding. There are many misconceptions about trusts and to see one of our large political parties correctly identify a very positive feature of trusts can only be good.

Disability trusts are arrangements that set up an administrative mechanism over property to support people with a disability as beneficiaries.

This is done in relation to assets which their parents would have dedicated to their future maintenance and general care. Trustees are subject to strict legal obligations. They are given powerful tools to manage patrimonial interests of the disabled person and his or her wider family and cater for what happens after the beneficiary passes away. No institute in Maltese law can achieve the same outcomes as a trust in this context.

It is important to address some grave misstatements made during the said TV programme. Otherwise if we allow misconceptions to proliferate this will detract from the positive ideas being proposed and the general acceptance of the use of trusts in the disability sector.

A speaker representing the disability sector clearly had no idea what he was talking about. He read up on the subject and, of course, found a lot about trusts without knowing which parts are relevant to Malta and Maltese law, the ordinary use of trusts in everyday life and the use of trusts in the disability sector.

When one researches about trusts it is very important to make some fundamental choices. The offshore world has, to an extent, turned trusts into a product which has sometimes been used for illegitimate purposes such as tax evasion, hiding of assets and deprivation of rights of third parties. Some local websites market trusts commercially just like insurance policies and investment products. This kind of product is not suitable for the disability sector.

Then there are trusts in the ordinary legal systems of countries like England where they are used every day by people for ordinary reasons to achieve the patrimonial outcomes offered by what I consider an exceptional legal institute which has much to offer us. Looked at in this way one will find a different story.

Malta enacted an Offshore Trusts Act in 1988, and for a time it was an offshore law with a negative orientation. This only lasted as a policy direction until 1992 when the government changed tack. In 2000, the government took a very bold decision to phase out all that was offshore about the trusts law and introduce trusts holistically within our ordinary domestic civil law.

Through a 2004 law we made trusts part of our ordinary law and chose to follow the example of classical English law, not the modern product-oriented offshore laws that emphasised secrecy, tax exemption and discrimination on who can use them (only non-residents).

We enacted laws on taxation of trusts, amended laws on succession, on ownership and transfers and addressed things like security structures, notarial procedures and regulation of trustees by the Malta Financial Services Authority.

So when one is trying to learn about trusts in Malta it is important to avoid the mistake of looking at irrelevant and inapplicable material.

The use of trusts for the disability sector was a pillar of the project and one of the reasons in favour of the policy decision taken by then minister John Dalli and minister Austin Gatt, supported by then Attorney General Anthony Borg Barthet.

The legislative project of 2004 has several provisions addressing the disability trust. There are some provisions of our Civil Code which go into very minute detail on what happens when a family have a disabled child, wish to dedicate what they have to the care of that child and run into the problem of denying the rest of their children the reserved portion under the law of succession.

The law also sought to define what disability meant in the context of a trust. One naturally looks forward to more effort in enhancing the existing provisions with more detail and solutions, now that the provisions have operated for over eight years.

Things can always be better and one hopes this is what the Labour Party will seek to do rather than attempt to start from scratch again.

The same representative of the disability sector said that the trustee takes 30 per cent of the income of the trust, 35 per cent goes to tax and the beneficiary is left with a small percentage of his entitlement. This is a ridiculous statement.

If trustees charge at all, charges are a small percentage and there are many different ways in which trustees charge, but under no scenario are fees ever 30 per cent. If any trustee tried to charge so much that the beneficiary would lose his intended benefit, then he should be reported to the MFSA and sued for misappropriation.

My experience with disability trusts is that charges are very carefully managed to protect the disabled beneficiary. Often no or very little charges not exceeding a couple of hundred euros are expected.

On this very score, Maltese law was drafted to allow private trustees to be the trustees of trusts where the settlor chooses a member of his family or a close friend of more than 10 years’ acquaintance. These trus­tees cannot even charge fees under our law. They are usually brothers, sisters or uncles or aunts.

Private trustees must use notaries for record keeping, and these professionals may charge some fees, but again my experience is that notaries charge very sensitively when the trust is a disability trust.

So Maltese law makes sure there are options to any parent wanting to create a disability trust so as not to incur unnecessary charges which, however small they are, reduce what is available.

Of course, choosing family members, usually other children who are siblings of the disabled child, does create its own complexity due to potential conflicts of interest. Siblings are, however, usually very dedicated to the disabled child and put the disabled person’s interests before their own, even when dealing with an inheritance.

I look forward to the continuing evolution and implementation of ideas on disability trusts under Maltese law.