The UAE Trust Law : The Federal Law No. 19, 2020, concerning ‘Trust’

The law of trust was issued to provide a safe and developed investment environment and provide modern tools to protect wealth and develop the business environment in the United Arab Emirates. The law was issued on 27 September 2020.


The law has established an integrated legislative framework for wealth owners to put part of their wealth as a trust at natural persons or specialized and qualified institutions with experience in investment tools in order to maintain, develop and manage them in an optimal manner.


The Trust Law provides new legal tools such as managing family wealth, encouraging charitable trust, serving investors in the financial markets and regulating the relationship between all parties.


Types of Trust:


1- Family trust that targets family wealth and distributes their benefits to relatives.

2- Charitable trust that is established for charitable purposes.

3- The special trust that is established for the purpose of dealing in security in various forms of dealing recognized in the financial markets, or for the purpose of establishing pension funds or ensuring the availability of benefits to beneficiaries in return for regular contributions paid for the special trust.


The Purpose of the Trust Law :


The Trust Law provides the appropriate legislative framework.

The person (trust originator), whether natural or legal, is allowed to allocate any part of his money (the trust money) to place his trust in the hands of a person (natural or legal) called the trustee with the aim of managing, investing it and distributing its benefits to people (beneficiaries) whether from his relatives or

others or for a specific purpose whether it is the end of a charitable trust or the end of private trust. Thus, the decree-law facilitates the growing wealth management sector in the country and introduces new mechanisms for managing companies and family funds, in addition to encouraging the allocation of the charitable trust, as the need to find legal tools that enable companies or persons who own various capital and financial rights and wish to hand over this wealth and rights as a financial trust with another trusted person to manage and develop the funds. This is because they do not have the necessary know-how and experience in managing these funds, or they do not have enough time to manage them or for any other reasons, when this is done through a special document called the trust deed that is registered electronically to reflect what it contains money, whether movable or real properties and indicate the trust rights in the official records of those funds.


Beneficiaries of the financial Trust Law:


Includes all members of the society, whether natural or legal persons.


Means of establishing a Trust:


-Editing the trust deed.


-Through the will or any procedures that have consequences after death, provided that this does not violate public order.


-Transferring money from one effective trust to another one.


-Through the court, if the person who owns the money does not have the eligibility to originate the trust, provided that this is done at the request of the guardian or the tutor to achieve the interest of that person, and in this case, it is required that the person is the beneficiary of the trust, and the competent court shall appoint a trustee and determine the terms of the trust deed.


Conditions for establishing the trust:


The law stipulates a set of conditions for the establishment of the trust, which are:

- The originator of the trust enjoys the eligibility if he is a natural person. If he is a legal person, a competent authority must issue a decision to dispose of his money in accordance with the legislation in force in the country.

- The originator of the trust is the owner of the trust money or has the right to dispose of it in accordance with the provisions of this decree-law and the relevant legislation.

- Determining the beneficiary of the trust in accordance with the provisions of this decree-law.

- Determining the purpose of the trust if it has charitable goals or has specific goals.

- Determining the trustee or that it is possible to specify him to work as a trustee upon his appointment.

- The money allocated for the trust is something that can be disposed of, and that it is not accompanied by a fixed right of third parties unless the owner of the right accepts that in writing.

- The money allocated for the trust should be specified or capable of being appointed, which denies ignorance, and it may be from what will be realized in the future.


Conditions to be met by the trust originator :


The originator of the trust is the person who owns the money that is to be transferred to the trust, so this money comes out of his custody and moves to the trust where after that the trustee has all the powers and authorities in accordance with what is stipulated in the bond of trust and the provisions of the law.


The conditions of the trust originator are:


- Any person who fulfils the eligibility requirements for performance.

- In determining the eligibility of the non-citizen originator of the trust, the provisions of article (11) of the civil transaction law shall be taken into consideration.


- If the originator of the trust is a legal person, a decision must be issued by the competent authority to dispose of its funds in accordance with the legislation in force in the country.


Obligations of the trust originator:

-After establishing the trust according to the correct trust deed, the trust originator shall abide by the following :

- Transferring funds to the trust and transferring the powers and authorities over them to the trustee within a period not exceeding (6) six months from the date of entering the trust in the register, unless otherwise stipulated in the trust deed.

- Delivering all documents and data related to the trust funds within the period stipulated in the previous paragraph.


Powers of the trust originator:


- Termination or revocation of the trust, in whole or in part, unless the trust is irrevocable.


- Amending or changing the objectives of the trust. In this case, it is permissible to prompt the authority to make the amendment or change for a specific period so that the originator of the trust exercises the authority to amend or change after the lapse of that period, provided that this is done during his lifetime.

- Amending any condition of the trust deed in whole or in part.

-Adding a new beneficiary or excluding any beneficiary from the trust, modifying the rights of any beneficiary, or setting conditions related to identifying the beneficiaries or related to their entitlement to the benefit of the trust in a final or temporary capacity, it is permissible to mention in the deed of the trust who has the right to exercise this power and any other conditions related to that.


- Appointing or dismissing the trustee or any other person who has been appointed or granted powers or authorities under the provisions of this decree-law related to the trust, unless the appointment of that person was made by a decision of the competent court.


- Changing the obligations of the trustee stipulated in the trust deed and restricting the trustee’s exercises of any of his powers or authorities, and restricting them with written consent from the originator of the trust or any other person specified in the trust deed.


- Issuing instructions directed to the trustee regarding the management of trust funds, disposing of them, how to use, exploit or invest them, or appointing or authorizing any person to carry them out.


Duration or end of the trust:


The law stipulated that the term of the trust must be specified in the trust deed, but if the trust is not specified, the trust is considered to be lifelong unless the circumstances of the case indicate otherwise, according to what the court estimate.


The text of the law regarding the term is as follows:


- The beginning or end of the trust period may be linked to a fact or a specific legitimate and verifiable cause, provided that this is explicitly mentioned in the trust deed.

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- If the period for the charitable trust has been determined, and that period has expired, and it was not possible to verify the will of the originator of the trust about what the trust money will devolve to after that, the competent court may terminate the trust, or issue a decision to allocate the trust to any charitable purpose consistent with the purpose of the trust for the period it specifies.

Cases of terminations of the trust:


- The retraction of the trust originator from the trust in case stipulating in the trust deed that it is permissible.


- If the trust expires


- The end of the trust, except for the charitable trust, which is renewed according to what is stipulated in the trust.

- Based on the agreement of the trust originator, trustee and the beneficiary who has the right to dispose of the trust according to a written deed document notarized in the trust deed.

- If the trust deed permits the termination of the trust based on a written request submitted to the trustee from all current beneficiaries, provided that they have the eligibility and that they have the full right to the trust funds.

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