Trust Law in Ireland
Trust Law in IrelandUpdated on Thursday 25th February 2021
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The Irish legislation recognizes the trust as one of the legal entities that can be registered by both local and foreign businessmen. Generally speaking, this type of vehicle is addressed to high net worth individuals who want to secure their assets. It is also important to know that Ireland prescribes a legislation concerning the registration of a charitable trust in this country.
In the case of foreign businessmen who want to set up a trust here, they must relocate a part of their financial assets in order to register this type of entity. Our Irish lawyers can offer assistance on the registration procedure, as well as on the main types of trusts which are available to foreign investors.
Legislation for Irish trusts
An important factor in choosing Ireland for the registration of a trust is the fact that the country has a long tradition in establishing this type of entity. The trust legislation in Ireland is rooted in the provisions stipulated by the English legislation. The Irish tradition referring to the registration of such entities dates back from 1893, when the local authorities enforced the Trustee Act. Since then, the Act has been modified several times, the latest change being introduced in 2008, under the Trustee Bill.
The main parties in an Irish trust
The Irish trust legislation, just as the laws of other countries provide for the following parties to participate in a trust:
- the settlor which is the person creating the trust;
- the trustee which the person or even company in some cases administering the trust;
- the beneficiary which is the party inheriting or in whose name the trust was created.
There are no specific requirements related to the creation of a trust, however, the document through which it is set up must comply with specific conditions established under the Irish legislation.
If you want to create a trust and need information, our lawyers in Ireland are at your service with detailed information.
Types of trusts in Ireland
Investors who want to invest in Ireland through a trust should know that the country offers several types of trusts, which provide various advantages. Our team of Irish lawyers can assist foreign businessmen with in-depth information concerning the advantages of a particular type of trust and may also advise on the registration requirements imposed of each type of entity:
- • bare trusts - the assets of the trusts are held for a single beneficiary through a trustee;
- • the trustee is the person who has the legal right to hold and manage the respective assets;
- • fixed interest trusts - the settlor has the right to establish the way in which the income of the trust will be distributed amongst the beneficiaries;
- • discretionary trusts - in this case, the assets are held for a group of beneficiaries, who can receive their entitlements as prescribed by the trustee;
- • charitable trusts - this type of trust has to follow the regulations prescribed by the Charities Act 2009.
Setting up an Irish trust for asset protection purposes
One of the main reasons for creating trusts all over the world is for an enhanced protection of assets held by natural persons seeking to protect their estate. This option is also available in Ireland where discretionary trusts can be set up in according with the English legislation on these types of entities.
In 2009, Ireland amended the Land and Conveyancing Law Reform Act through which the creation of a larger variety of trusts was enabled.
Also, another important change was related the possibility of creating trusts without a limited duration in time which is the case of trust in other European and Western countries. This is also the case of the discretionary trust which has the following characteristics:
- the trustee can become the legal owner of the assets for the duration of the trust;
- because of this trait, the settlor and the beneficiary will benefit from extended tax benefits.
The trust can be created through a legal deed which needs to be drafted by a lawyer and which must contain the following information:
- the personal details of the settlor, such as the full name and domicile;
- the details of the trustees depending on whether these are natural persons or companies;
- information about the beneficiary or beneficiaries of the assets held in trust;
- detailed information about the assets and their administration;
- the duration of the trust, even if it is set up for an unlimited period of time.
With respect to the assets that can be protected through a trust, these can range from real estate property to important amounts of money deposited in a bank account and other assets, such as jewelry.
Our law firm in Ireland can help you set up a trust for asset protection purposes, including in case of divorce in Ireland.
The bare trust in Ireland
One of the most popular types of trusts in Ireland is the bare trust which is usually created for the protection of minor children. This is often the choice of parents who want to ensure their children have sufficient funds for school or other purposes after they reach the legal age of 18.
Foreign citizens can also set up bare trusts in Ireland or in other countries. In the latter situation, foreign trusts can be recognized under the Irish Trust Law.
The creation of a bare trust in Ireland attracts several benefits, mostly related to tax exemptions. Among these are the Capital Acquisition Tax and the small gift tax exemptions.
If you consider the bare trust to be a good option to protect your children’s interests, you can rely on our Irish lawyers for assistance in setting one up.
We remind you that our lawyers are part of the Law Society of England.
Unit trusts for investment purposes in Ireland
An important type of trust is the unit trust that can be used for creating investment funds in Ireland. These non-corporate entities registered for the purpose of setting up various types of investment funds. In this case, the beneficiaries are the investors, while the trustee is the management company or the fund manager.
The unit trust is created through a deed of trust and the Irish investment fund is set up as a contractual fund structure.
Our Irish law firm can also help foreign investors who want to create investment funds under the form of unit trusts.
Our lawyers invite you to watch the following video on trusts:
What are the main benefits of an Irish trust?
The Irish trust provides a set of advantages, one of them being that the entity can be set up by foreigners. It allows 100% foreign ownership and it is a suitable vehicle for asset protection. More importantly, the Irish trust can be registered for a lifetime, as its existence can be ceased once the owner had passed away. However, the person setting up the trust is entitled to close it during his or her lifetime.
Another advantage is given by the country’s long history in establishing this type of vehicle, as well as the wide range of trusts that can be registered here, which can be set up for specific reasons. More importantly, if the trust is registered by a foreigner, it can also benefit from the provisions of the double tax treaties signed here, in specific conditions, although such documents were not specifically created for the benefit of a trust.
Taxes applicable to trusts in Ireland
The taxation system in Ireland referring to trusts includes a set of taxes and tax compliance procedures that have to be concluded by the trust’s representatives. A trust is seen, from a legal point of view, as a different entity from its trustees and beneficiaries and thus, it is required to file tax returns. A trust is imposed with the following taxes:
- • income tax – applicable at a rate of 20% on the trust’s income and the Section 805 of the Taxes Consolidation Act can also be applied;
- • capital acquisition tax – the tax is imposed based on specific financial thresholds that are applicable to certain categories of beneficiaries and when the threshold is exceeded, the tax will be applied at a rate of 33%;
- • discretionary trust tax – imposed at a rate of 6% and if the trust is closed in a period of maximum 5 years since it was set up, the local legislation states that a refund of 50% on the respective sum can be applied;
- • capital gains tax – a type of tax which is applicable to the trustees and it is imposed on the disposal of the trust assets;
- • stamp duty – this tax can be applied on the transfer of assets of a trust and the tax rate varies depending on the nature of the asset (in the case of residential property, the tax is applied at the rate of 1%, while in the case of a commercial property transfer, the tax rate is of 2%).
As presented in this list, the capital acquisition tax is imposed on specific thresholds. Currently, there are three main types of thresholds, applicable based on the nature of the relation of the beneficiaries with the person setting up the trust. Thus, in the case in which the beneficiary is a child (who can be an adopted child, step-child or foster child), the tax free threshold is up to EUR 320,000. Provided that the sum is above this threshold, then the capital acquisition tax will be charged at 33%.
In the case in which the beneficiary is a brother, sister, niece, nephew or grandchild, the threshold is of EUR 32,000, while in the case of any other types of family relations, besides the ones mentioned above, the threshold is of EUR 16,250. Our team of lawyers in Ireland can offer more information on the tax system applicable to local trusts.
What are the tax implications for non-residents receiving income from Irish trusts?
Non-residents in Ireland are entitled to receive income from a trust; when this happens, the non-residents are entitled to receive a repayment of the Irish tax applicable to the respective income. This can be done by filling specific forms with the Irish Revenue; in this case, the persons have to complete the Form IC9 and the Form R185.
When completing the Form IC9, it is compulsory to file the documents that refer to the registration of the respective trust (the following are accepted: the will, the grant of probate or the trust deed). The Form R185 has to be completed by the trustees.
The repayment claims can be made by those who are entitled to the tax repayment in a period of four years since the end of the financial year when the tax was deducted, as stipulated by the provisions of the Finance Act 2003 (Section 17); our team of Irish lawyers can provide more information on other tax benefits associated with this structure.
What are the requirements for setting up a will trust in Ireland?
A will trust in Ireland is a type of trust that in which its effect starts only after the death of the person making the will. Through the will trust, a person obtains the right to administer the assets of the person making the will for the benefit of other persons, for a charitable purpose or for any other purpose that is recognized under the local legislation.
The will trust can only be administered following the expressed wish of the testator and for its constitution, several aspects have to be respected. In this particular case, the will trust has to contain the following elements: the subject of the trust has to be clearly stipulated, in the sense that the testator must provide information on the property that is subjected to the trust, as well as on the manner in which the beneficiaries will receive their rights.
The name of the beneficiaries have to be stipulated and the manner in which the testator expresses his or her desires has to be very clear and imperative, with the purpose of showing the persons’ clear intentions; the legal requirements for having a valid will trust are given by the provisions of the Succession Act 1965, which can be detailed by our Irish law firm.
Who can be a trustee in Ireland?
As we mentioned earlier, when establishing a trust in Ireland, it is necessary to appoint a trustee. According to the Irish legislation, the trustee can be a family member or a close friend, but it can also be a professional, such as an Irish lawyer or an accountant; provided that the trustee selected will be a professional, the person can charge a fee for the services he or she will offer. It is also important to know that, as a general rule, a trust is represented by two trustees, the maximum being four.
The Irish legislation mentions that the trustee can also be one of the trust’s beneficiaries, but in practice, this is generally avoided, as there may appear various conflicts of interest. As a general rule, the trustees are appointed by the testator, but throughout the lifetime of the trust, the trustees may change and new trustees can be appointed by the previous trustees, who have the legal right to perform this action. Our team of lawyers in Ireland can offer more details on the provisions applicable in this case, which are prescribed by the Trustee Act 1893 and the Succession Act.
Trustees in Ireland have the following responsibilities: preserve and collect the assets of the testator, the power to invest, respecting the wish of the testator and representing the best interest of the respective person, not making profit from the assets managed for the testator and distribute the assets according to the wish of the testator.
FAQ on Irish trusts
- What is the main reason for creating a trust in Ireland?
The main reason for setting up a trust in Ireland or any country in the world is the enhanced privacy it offers to the settlor and beneficiaries.
- Can foreign citizens set up trusts in Ireland?
Yes, foreign citizens are allowed to create Irish trusts.
- What are the documents needed to create an Irish trust?
The main document that needs to be drafted when setting up a trust is the deed of trust which must be created by a lawyer in order to ensure its correctness.
- Must a trust be registered with any authority?
In cases where real estate properties are left as assets, trusts need to be registered with the Land Register in Ireland.
We can also answer any details about a trust created jointly prior to divorce in Ireland.
Persons who are taking into consideration the registration of a trust in Ireland and who are interested in finding out more details on the Trust Law are invited to contact our Irish law firm. Our attorneys can assist with further advice on the tax compliance applicable to this structure.