As the name suggests, this is a trust established for a particular purpose, which can be charitable or non-charitable. Unlike other types of trust, a purpose trust does not need to have any beneficiaries or anyone who has beneficial ownership. This can be useful for carrying out a number of different transactions.
Charitable trusts are set up for the benefit of the community as a whole or a substantial section of the community. Their purpose must be for one of the following reasons:
- The relief or eradication of poverty
- The advancement of education
- The promotion of art, science or religion
- The protection of the environment
- The advancement of human rights and fundamental freedom or any other purposes which benefit the community
A non-charitable trust is one that is created for a particular purpose as decided upon by the settlor or his personal representatives.
Labuan Purpose Trust Distinctive Benefits
Below are some of the reasons Labuan Purpose Trusts are set up:
- In order to secure asset financing.
- For joint ventures where neither party wants to be formally associated with the other or to be in control of the voting power
- For the ownership of a private trust company. If a company is incorporated in order to be the trustee of a private trust for a family, the shares of that trustee company can now be held in a Labuan purpose trust
- To incorporate and hold shares in a private trust company to act as a particular trust or group of trusts
- To hold shares in a Special Purpose Vehicle (SPV). Usually SPVs are used in off-balance sheet transactions, securitization and debt clearance transactions, or for various commercial transactions
- To act as an impartial custodian or where a settlor would like the purpose to be one that is neither personal or charitable
- To isolate investment funds or asset ownership within a subsidiary from group risk
- To benefits an arts collection and to provide funds for its maintenance
- To make the most of the generous tax benefits on the island when distributing and transferring the assets of the trust
Key features of a Labuan Purpose Trust
- The purpose of the trust will be laid out in the terms of the trust and there are no restrictions on what the purpose may be. However, according to the Labuan Trusts Act 1996, the purpose must be valid, which is why it’s best to get professional advice before deciding upon the purpose of your trust
- Two or more trustees must be appointed but they do not have to be resident in Labuan
- Because there are no beneficiaries, all the assets or profits derived from them must go towards the purpose of trust
- A person must be appointed to enforce the trust and this person or company must ensure that the trustees carry out their duties and apply trust funds for the proper purposes
- There is no rule against perpetuities, however, a trust can only exist for a maximum of 100 years. At the end of this period the trust property should be distributed to the people who are entitled to it, as laid out in the terms of the trust
The Valsen Advantage
- Speedy, Efficient and consistent Services.
- Relentless effort to obtain bank accounts.
- Expert advice on structuring options.
- Dedicated ongoing compliance support.