A Trust is an arrangement whereby a person known as the ‘Settlor’ transfers ownership of property to another person or persons, the 'Trustees’ for them to hold on behalf of third persons, the ‘Beneficiaries’. The assets are placed under the control of the Trustees for the benefit of the beneficiaries or for a specified purpose.
Cyprus trust law is essentially based on the English system. Trusts are mainly regulated by the Trustee Law, Chapter 193, enacted in 1955 and based on the English 1925 Trustees Act. This is supplemented by the English doctrine of equity and English case law prior to 1960. In 1992, Cyprus enacted the International Trusts Law. This was done to update and modernise the law and establish Cyprus as an offshore and financial centre and a serious trusts jurisdiction.
The Law does not provide a comprehensive definition of ‘trusts’. Trusts law was principally developed by Cyprus case law. Accordingly, a trust arrangement entails the following:
a) an obligation on the holder of property (the “trustee”)
b) to manage that property (the “trust property”)
c) for the benefit of another (the “beneficiary”).
The legal title to the trust property is vested in the trustee by its previous owner (the “settlor”) and the trust property is managed by the trustee in accordance with the instructions of the settlor, which are usually given in writing or expressed in a trust deed (the “trust instrument”). The instructions may also be oral.
It is of utmost importance to note that although the trustee has legal ownership of the trust property, it does not belong to him. The beneficial owner/s of the trust property is/are the beneficiary/ies and the trust property is only available to them.
For a valid trust to be created, the following three certainties must be present:
a) Certainty of intention – there must be evidence of the express intention of the settlor to create the trust. This is usually evidenced by the trust instrument (it is possible to have orally created trusts);
b) Certainty of subject matter –the assets that are to become the trust property must be readily identifiable, i.e. money, property, shares etc;
c) Certainty of objects –the identity of all the intended beneficiaries of the trust must be ascertained or ascertainable at the time of setting up the trust.