An overview of DIFC Trust

DIFC

The Dubai International Financial Centre (DIFC) is a particular territorial jurisdiction within Dubai having its own regulatory framework based on international standards and principles of common law authority being a constituent component of Dubai. As an independent jurisdiction within the UAE, DIFC is empowered to create its own legal and regulatory framework for all civil and commercial matters. The DIFC Courts are not only an important part of the constituent of the Dubai Courts but also an integral component of the Federal judicial system of UAE.

The DIFC authorities have published laws on the establishment of trusts and foundations in the DIFC free zone in the form of DIFC Law No.4 of 2018. The prime motive of trust law is to make DIFC Trust equal with international laws by following the US uniform Trust code and Common Law Trust UK model. The law provides a precise foundation for the legal establishment and management of Trust.

How the Trust works:

Trusts are useful vehicles for asset protection, succession planning and wealth preservation. The DIFC trust is formulated in accordance to the benefits of its beneficiaries. Trust assures the legal protection to the asset of trustees, reduce the paperwork, and all the extra state taxes and formalities that take much time. It is pertinent to mention that as per the DIFC trust law, the trustee has lawful possession of the trust property, and beneficial ownership goes with the beneficiaries. The DIFC trust can be terminated at any stage where it does not support the trust purpose anymore.

A trust is called to be invalid if it is intended to do the immoral, unethical, and violative to the DIFC Law. The trust should not be involved in scams, fraud, false statements, any pressure, or misinformation from any party. It should not be against the public policy, ordinance, rules, and regulations and far away from reality.

Essential conditions of a DIFC Trust:

The following are the essential conditions that are to be fulfilled before establishing a Trust in the DIFC:

• Settlor must possess the capacity and indicate the intention to create the trust;
• The intended trust should have an identified beneficiary unless it is a charitable trust or non-charitable trust as per law;
• The property has been vested with the trustee, who has defined duties and such property is held for the beneficial interest of the beneficiaries; and
• The same person is not the sole trustee and beneficiary.