The article will focus on Trust in the UAE, highlighting that the regulations outlined in this Decree-Law do not pertain to Financial Free Zones. These zones operate under distinctive legislation that regulates the creation of trusts.

Commencing with a broad introduction, a Trust is a legal arrangement wherein an individual, also known as the Founder, transfers their assets to a Trustee (Founder). The Trustee is entrusted with the ownership and management of these assets (Trustee), aligning with the interests of designated beneficiaries (Beneficiaries), that must be clearly identified and are entitled to receive the benefits stipulated by the trust (Trust). When a Founder transfers property to the Trustee, they surrender legal ownership rights while retaining a degree of control. This feature is crucial as it serves to protect these assets from potential claims.

Typically governed by a trust deed, the legal document outlines the Trust's terms, duration, list of Beneficiaries, powers granted to the Trustee, and other pertinent details. The Trustee assumes the responsibility of asset ownership and management as specified in the trust deed and may receive compensation for their services. For additional oversight, the Founder holds the authority to appoint a Protector who supervises the Trustee's actions (Protector). The Founder can outline the Protector's powers, some of which are given below:

1- authorize them to assess the Trustee's performance,
2- demand the fulfillment of duties,
3- file a lawsuit if the Trustee neglects their responsibilities and obligations.

The legal framework also places limitations on the Protector, aiming to ensure the smooth implementation of the Trust and to affirm their integrity in fulfilling their role. It explicitly prohibits actions such as placing themselves in positions that create conflicts with their duties and obligations.

In addition to overseeing asset management, the Trustee is responsible for disbursing income to the beneficiaries of the Trust, adhering to the specific instructions laid out by the Founder in the Trust Deed.

In the ongoing exploration of the legal aspects of trusts, it is emphasized that a trust attains legal status upon its initial registration. It enjoys financial and administrative independence, holds the right to litigate, and is represented by the Trustee. Crucially, the Trust Founder, Trustee, as well as their heirs or successors, are not deemed owners of the Trust. This principle remains intact in situations involving death, bankruptcy, or liquidation procedures pertaining to any of these individuals. This implies a degree of independence between the Trust and its Founder or Trustee. This independence can be advantageous for both the Trust and those overseeing it. This autonomy functions as a protective measure for the assets of each party involved. Moreover, it serves as a mechanism to safeguard an individual's wealth by establishing a clear separation between assets and personal ownership.

Moving forward, we will conduct a more comprehensive examination of the laws governing trusts, delving into each of its facets in greater detail. The establishment of a trust involves adhering to specific rules and regulations. As the Trust Founder intends to transfer these assets through the Trust, they should also be capable of disposal and devoid of any inalienable rights held by a third party. Additionally, the assets must be clearly identified or identifiable. The law outlines specific conditions for the presentation of the trust deed and specifies the required information it must contain, failure to adhere to these conditions poses the risk of invalidation.

The law comprehensively addresses the roles and responsibilities of each party involved in the Trust, commencing with the Trust Founder. Despite the Founder's transfer of assets to the Trust, he retains certain crucial and paramount powers. These powers, explicitly articulated in the Trust deed, grant the Founder the utmost authority and precedence over all other parties within the Trust. Notably, these prerogatives encompass the ability to terminate or partially revoke the trust, as well as the authority to appoint or dismiss the Trustee, Protector, or any other individual endowed with specified powers in accordance with legal provisions. These provisions underscore the Founder's enduring rights and control over the assets, reaffirming their significance even after the transfer.

The criteria for appointing a trustee are structured to ensure that the individual chosen possesses an exemplary reputation and has not been previously convicted of a felony or misdemeanor involving moral turpitude or dishonesty, unless successfully rehabilitated. This requirement is substantiated by the submission of a Police Clearance Certificate or its equivalent from the Competent Authorities in the UAE (United Arab Emirates). In the case of a legal person, the Trustee must be a licensed professional in accordance with the relevant cabinet decisions of each Emirate. The meticulous scrutiny and assurance of the Trustee's character play a pivotal role in ensuring that the entrusted assets are in capable hands, especially the Trustee shall have all the powers and authorities in respect of the Trust Assets. The legal framework emphasizes the selection of an individual who is trustworthy and law-abiding to minimize the risk of appointing someone unsuitable for a position of authority over the assets.

The legislation also addresses various aspects pertaining to the Trustee, encompassing procedures for resignation, release from position, or suspension of the Trustee, as well as the dismissal of the Trustee and the expiration of their powers. Additionally, it delineates the consequences and implications arising from the cessation of the Trustee's powers. The Trustee holds both powers and obligations inherent to their position within the Trust, outlining a set of responsibilities that they are obligated to fulfill.

Furthermore, the Trustee is required to maintain both paper and electronic accounting books and records, subject to audit by an independent auditor appointed for the Trust. These responsibilities underscore the importance of transparency in the Trustee's actions. It is imperative for the Trustee to demonstrate absolute compliance with relevant laws.

The liability of the Trustee is specifically delineated under defined circumstances, such as accountability for any loss of Trust Assets resulting from breaches of the Trust Deed, intentional errors, or gross negligence. The inclusion of the liability clause reinforces the Trust vested in the Trustee, underscoring the understanding that they will be held accountable for specified actions. The extensive provisions in the law regarding the Trustee are elucidated by the pivotal role they play as the manager of the assets.

It is crucial to note that, the Trust is considered properly established in accordance with legal provisions upon the approval of the Trust Deed and the fulfillment of the Initial Registration procedures by the competent authority. A register shall be instituted through the decision of the Competent Authority in each Emirate, and it will be maintained by the respective Competent Authority in that Emirate. Completion of registration procedures, as outlined in the law, is imperative for the valid and legitimate establishment of a Trust. Beyond the initial registration, all transactions involving the Trust Assets conducted in the name of the Trust must be recorded in the official records of these assets, adhering to the applicable federal or local legislation in force in the UAE.

Shifting focus, the law explicitly outlines that, among various circumstances, if the court concludes that the Trust was instituted through forgery, coercion, error, fraud, or deception, or if it was founded on inaccurate information in violation of the Trust Deed and the regulations specified in this Decree-Law, or if it is substantiated that the Trust's purpose is for the Trust Founder to evade settling debts, taxes, or any other financial obligations, the Trust will be considered invalid. The law goes on to elaborate on the situations triggering the termination of the Trust and delineates the repercussions of such conclusion. Finally, the law strongly emphasis the importance of confidentiality within the trust framework. This is evident in the provision allowing the Trust Deed to outline conditions and controls for the access of Beneficiaries or the Protector to specific details, including information about the distribution of trust benefits and the criteria for Trustee decision-making. Moreover, disclosure of data from the Register is restricted, with exceptions outlined by the law, and any disclosure must comply with a court order, aligning with Trust Deed provisions. In conclusion, establishing a trust in the UAE offers numerous and significant advantages. It provides a strategic avenue for individuals to plan the distribution of their assets, ensuring a structured estate plan. Trusts also enable continuous and uninterrupted asset management, reducing the likelihood of disputes by explicitly defining terms of distribution. This guarantees a seamless transition of ownership across generations, facilitating efficient and continuous transfer of assets. For foreigners, trusts offer a secure succession planning method through appointed trustees, ensuring professional and administrative management, protection, and distribution of assets according to predefined terms.

At Rasma, we've supported numerous clients in establishing trusts. If you're interested in learning more, don't hesitate to contact us at info@rasmalegal.com for a friendly discussion.