Dubai Lawyers

dubai lawyer logo 1

Establishing a Trust in the UAE: A Comprehensive Guide for Founders

Establishing a Trust in the UAE: A Comprehensive Guide for Founders

Home / BLOG / Establishing a Trust in the UAE: A Comprehensive Guide for Founders

A trust is a legal arrangement where an individual (the trust founder) transfers assets to another individual (the trustee), who manages them for the benefit of a third party (the beneficiary) or for a specific purpose. Trusts serve various purposes, including wealth preservation, succession planning, asset protection, tax planning, and maintaining confidentiality.

In the UAE, trusts are regulated by Federal Decree-Law No. 31/2023 Concerning Trust (the Decree-Law). This guide outlines the key requirements and procedures for establishing a trust in the UAE and details the contents of the trust deed, the document that formalizes the trust.

What is a Trust?

A trust is a legal entity established under a Trust Deed in accordance with the provisions of the Decree-Law to fulfill the Purpose of the Trust.

How to Create a Trust in the UAE

The trust deed is the document that establishes the trust and outlines its terms and conditions.

The trust deed must meet the following requirements:

1. Approval by the competent authority is necessary.
2. The trust deed must be in written form and signed by the trust founder or each of the trust founders, if there are multiple founders, in accordance with the procedures of the competent authority. If the appointed trustee, or one of the trustees if there are multiple, accepts the appointment, the trust deed may also be signed by that individual.
3. It must be entered into the register maintained by the competent authority.

Once the competent authority approves the trust deed and issues a certificate of validity and enforcement for the trust, the trust deed will be registered and valid for all parties. Only a court can declare the trust invalid based on Article (39) of the Decree-Law.

The trust deed and any related documents can be in Arabic or any other language, but they must be accompanied by a certified legal translation in Arabic. In case of any conflict, the language of the original trust deed will prevail.

Key Elements of a Trust Deed in the UAE

The trust deed must include the following information:

1. A declaration by the trust founder of the intention to create the trust.
2. The identification of the beneficiary or the mechanism for identifying the beneficiary.
3. A description or determination of the nature of the trust assets in a way that allows their identification.
4. The specification of the term of the trust. If the term is not specified, the trust will be considered lifelong unless otherwise determined by the competent court.
5. The specification of the name of the trust.
6. The designation of the trustee or the mechanism for designating the trustee.
7. The determination of the powers and authorities of the trustee.

If any of the above information is missing, except for the term of the trust, the trust deed will be invalid.

The trust deed can also encompass the following:

1. Detailed particulars regarding identifying the beneficiary and assigning their share, especially in scenarios with multiple beneficiaries.
2. Clarification on whether the beneficiary’s entitlement consists of benefits from the trust assets or a direct share of the assets themselves.
3. The trustee’s authority in safeguarding beneficiaries’ interests while distributing trust assets in accordance with the trust deed.
4. Stipulations concerning the management of trust assets.
5. Procedures for appointing, dismissing, and replacing the trustee, including associated consequences.
6. Ramifications of terminating the trust.
7. Any additional matters pertinent to the trustee’s responsibilities or regulating interactions among the trustee, trust founder, beneficiary, or protector.
8. Protocol for appointing the protector and defining their powers.
9. An outline of the trust’s purpose.
10. Any other relevant subjects allowable under the Decree-Law.

Assets eligible for inclusion in the Trust must meet certain criteria:

1. Ownership and Disposability: The trust founder must have legal ownership of the assets and the authority to dispose of them, either personally or through a legal representative, in accordance with UAE laws.

2. Freedom from Third-Party Claims: Assets must be free from any existing rights or claims by third parties. If such claims exist, the founder must transfer them to the trust along with the assets.

3. Identifiability and Inclusion of Future Assets: Assets must be clearly identified or identifiable, and the trust should encompass any assets acquired in the future.

4. Discretionary Transfer: The founder has the discretion to select which assets to transfer to the trust and when to do so. Transferring assets is not a prerequisite for establishing the trust.

5. Financial Disclosure: Trust assets are not subject to mandatory financial disclosure by the trustee, unless required in their capacity as trustee or by order of a competent court, or as per UAE laws.

These conditions ensure that the trust assets are validly constituted and protected within the legal framework of the UAE.

These conditions serve to safeguard the integrity and legality of the Trust structure within the legal framework of the UAE. By adhering to these requirements, the Trust ensures that assets are transferred with clarity, accountability, and in accordance with applicable laws.

Furthermore, these stipulations provide flexibility for the trust founder to manage their assets according to their preferences and circumstances. This includes the ability to retain control over certain assets while still establishing the Trust, as well as the freedom to decide the timing and extent of asset transfers.

Additionally, the provision regarding financial disclosure strikes a balance between transparency and privacy. It ensures that the Trust’s assets are protected from unnecessary scrutiny while allowing for disclosure in situations where it is legally required or prudent to do so.

Overall, these essential requirements establish a solid foundation for the Trust, promoting confidence and reliability in its operations while offering the founder the necessary flexibility and protection.

You may also read Perks of Hiring Debt Collection Services

The Term of a trust 

The term of a trust refers to the period throughout which the trust remains active and operational. This duration can be determined through various methods, including:

1. Specified Term: The trust deed may establish a fixed duration, either in years or until a specific date.

2. Event or Condition: Alternatively, the trust deed can tie the trust’s duration to a clear, lawful, and achievable event or condition. This could include the death of the trust founder or the fulfillment of the trust’s purpose, clearly outlined in the deed.

3. Default Lifespan: In the absence of specified terms or linked conditions in the trust deed, the trust is typically presumed to be lifelong, unless circumstances suggest otherwise.

4. Regarding trusts with fixed terms but lacking provisions for asset distribution upon conclusion, the competent court can intervene. Upon the request of any interested party – such as the founder, trustee, beneficiary, or protector – the court can oversee asset distribution. This process adheres to the guidelines outlined in Article 41 of the Decree-Law, which governs trust termination.

You may also read Need of Lawyers in Dubai for Legal Matters

How Dubai Lawyers Can Help You With Trust Services in the UAE

Dubai Lawyers is a leading law firm in Dubai that offers comprehensive and professional trust services in the UAE. Whether you seek to establish a trust in Dubai, safeguard your assets, plan your estate, or transfer your wealth to the next generation, Dubai Lawyers can assist you in achieving your objectives.

Trusts stand as one of the oldest and most effective methods to protect your assets and ensure confidentiality and privacy. However, trusts in the UAE are governed by legal and regulatory standards, necessitating expert guidance. Dubai Lawyers possesses the experience, knowledge, and expertise to aid you in all facets of trust formation, administration, and management in the UAE.

If you are in search of a trustworthy and esteemed trust service provider in the UAE, reach out to Dubai Lawyers today. Our team of qualified and dedicated lawyers will deliver personalized and tailored solutions that align with your specific needs and preferences. Seize this opportunity to secure your future and legacy with Dubai Lawyers.

Need Help? Let’s Get in Touch

Scroll to Top