New UAE’s Onshore Trust Law: All You Must Know

The UAE Ministry of Finance has published Decree-Law No. (19) of 2020, which governs trusts (Trust Law). With the implementation of this order, asset-owning people in the UAE can alter their attitude from short-term to long-term planning.

What does the Law say about Trust?

According to the Younis Haji Al Khoori, Undersecretary of the UAE Ministry of Finance, “The Trust Law was enacted by the Ministry of Finance to provide legal instruments. It allows corporations or individuals who hold various capital and financial rights to transfer their wealth and rights to a Trustee who is tasked with maintaining and developing those assets as a financial trust. This is done via a Trust Deed, which is a specific document that is electronically recorded to represent the assets, whether they are moveable or immovable. The presence of trust rights is then noted in the official records of such assets.” 

How is New Trust Law Helpful?

1. The Decree-Law promotes wealth management and introduces new tools for managing wealth and finances. 
2. It also promotes charitable trusts to be established.
3. The Decree-Law will improve the efficiency of the country’s financial regulations and policies, 
4. Provide a competitive environment that keeps up with the newest economies based on business and technology. 
5. It helps to preserve money by allowing it to be invested inside the country and providing a secure and developed economic environment. 
6. It also broadens the range of instruments available for profiting from and protecting wealth, and improving the business climate.
7. This Decree-Law will benefit all members of society, whether natural or legal persons, mainly family-owned businesses, as it will allow them to plan for the long-term continuity of their assets. 

What is a Trust Deed, exactly?

The capital owners and trustees will need to draft a Trust Deed to establish the right to administer money in a trust. It’s a document that keeps track of the assets that make up a Trust in an electronic format. These might be either financial or physical assets. The presence of Trust rights on these assets is then reflected in the official record of these assets. The Trust Deed is essential to applying the new Trust Law to trusts and their managed assets.

Appointment of Manager of Trust Property- A Trustee

The Decree-Law establishes an integrated framework for them to manage their money as trusts, which are managed by competent and experienced individuals or organizations known as the “Trustee.” Trustees are well-versed in various investing patterns and dangers, as well as how to manage them effectively. It is in addition to regular trusts for managing family assets. The individual can appoint a professional wealth manager and/or trustee to hold assets on their behalf based on specific investment and trust directives. It helps create confidence that, if any concerns arise, they can use statutory Law to have the trustee accountable and, if necessary, unwind the Trust.

Concept of Private Trust in New Decree-Law

A division for “Private Trusts” is established by this Decree-Law. Private Trusts are trusts established to carry out various types of securities trading accepted in the financial markets. These activities include the purchase, trading, and investment of securities. Private Trusts are also trusts established to establish pension funds or to ensure benefits for Beneficiaries in exchange for monthly contributions to the Private Trust.

Family with Wealth and Business Assets will be actual Beneficiaries 

Families that have historically considered offshore alternatives for protection and inheritance planning will be genuine beneficiaries of the new legislation. As a result, they will be able to prepare for the long-term continuity of their assets.

REASON FOR PASSING NEW TRUST LAW

• Onshore Applicability of Law 

Forming a Trust and appointing asset managers, and separating legal and beneficial ownership is standard practice across the globe. It is, however, a first for the United Arab Emirates. It had only been valid in two areas until now: the Dubai International Financial Centre and the Abu Dhabi Global Market. This structure will be spread across the country by introducing the new Trust Law, thereby bringing it onshore (mainland). The new Law will solve the issue of free zone trust agreements not asserting their rights on onshore assets.

• Demand for Private Trust

Citizens of the United Arab Emirates are already familiar with investment, private, and charity trusts. There was already a demand for such legislation because of the desire for privately held family trusts, real estate investment trusts, and other similar arrangements. Even though the two financial free zones mentioned above already had these institutions in place, they did not contain the primary push outside these zones. As a result, there was a compelling need to give these legal frameworks shape. 

• Strengthens the UAE’s status as a major financial center

The new legislation will improve the efficiency of the country’s financial laws and regulations. It will also boost the industry’s competitiveness and align it with nations already adopting this approach. Furthermore, the Law may aid in the preservation of capital and encourage companies to invest it in the country. It strengthens the UAE’s status as a major financial center and seeks to help the country become the greatest globally by the year 2071 when the UAE celebrates its centenary.

The purpose of this article is to give a broad overview of the topic. A trust transfer is a significant decision. Someone worried about trust asset management should consult with expert like HHS Lawyers and Legal Consultants about the options available and the potential consequences of conducting a trust transfer. Lawyers in Dubai can assist clients in forming a trust that meets their objectives while also adhering to all legal requirements. If you have any queries about the Trust’s creation, please do not hesitate to contact Experts.