The principal Manx legislation governing Trusts are the Trustee Acts 1961 and 2001, the Variation of Trusts Act 1961, the Perpetuities and Accumulation Act 1968 and the Purpose Trust Act 1996.
The Trusts Act 1995 introduced into Manx law provisions which take account of the Recognition of Trusts Act 1988 and the Hague Convention on the law applicable to trusts. This ensures that an Isle of Man court will not have regard to foreign laws in determining matters relating to the Trust, overcoming forced heirship issues.
A Trust deed is a private document and, apart from circumstances where the trust acquires land in the Isle of Man, there is no requirement for the deed to be publicly registered.
There are a variety of trusts available:
In a discretionary trust the Trustees have full 'discretion' on how best to apply the income and capital of the trust for the benefit of the beneficiaries. The trustees are bound by the provisions of the trust deed in making these decisions.
The trustees may be guided by a "letter of wishes" normally created at the same time as the trust deed, however the trustees are not legally bound by the letter of wishes.
INTEREST IN POSSESSION TRUSTS
An Interest in Possession Trust exists where a beneficiary has an absolute current right to all the income arising from the trust and is not reliant on the Trustees discretion.
The beneficiary need not have any right to the capital of such a trust which may pass to a second class of beneficiary on the death of the beneficiary with the absolute right to income.
Protective Trusts are commonly used for children, disabled persons, or anyone whom the settlor considers incapable of handling their own affairs adequately, but whom the settlor wishes to support financially.
Purpose Trusts are established to fulfill a particular purpose, rather than for the benefit of a particular beneficiary, or class of beneficiaries. The purpose of the trust does not have to be charitable
Corporate Trusts are mainly used to provide employee incentives or company pensions in a tax efficient way. They may also be commonly referred to as Employee Benefit Trusts.