There is no trust without a trustee. However, there is another essential party to the trust, without which the trust would be invalid: the beneficiary. The purpose behind creating a trust is to provide certain benefits to the beneficiary, that is, the person who is “entitled to benefit under a trust or in whose favour a discretion to distribute property held in trust may be exercised”. This definition is derived from Article 2(1) of the Trusts and Trustees Act (Chapter 331 of the Laws of Malta) (the “TTA”). In essence, the trust is all about the beneficiary’s rights and benefits over the trust property.
Where the trust identifies a beneficiary, it is important that the beneficiary of the trust is ascertainable and unequivocal. Article 9(4) of the TTA provides that the beneficiary must be identifiable by name or ascertainable by reference to a class or relationship to a person. In instances where the beneficiary is clearly identifiable and is named in the trust deed he would have a vested benefit and is entitled to benefit from that trust. Article 9(1) of the TTA provides that:
“[a] beneficiary has an entitlement, called a beneficial interest, in or to the trust property, as the case may be…”
Yet, there are certain instances where an exception is made, and the trust would not identify and ascertain a specific beneficiary. One such example of this is when a trust is set up for charitable purposes… “if there are no beneficiaries identifiable or ascertainable… the trust shall, unless the purpose of the trust is a charitable purpose, fail”. Rather than having a specific natural or legal person, the trustee of the trust would be entitled to choose a person falling within the scope of the trust’s purpose.
Moreover, the settlor may also grant the trustee the power to choose a beneficiary to be entitled to benefit from the trust in virtue of the discretion granted to the trustee. This is established in Article 9(9) of the TTA, which provides as follows:
“[a]person who may be added as a beneficiary in terms of a power granted to the trustee shall not enjoy any rights in relation to the trust property or against the trustee and shall not be considered a beneficiary in any manner until appointed as a beneficiary by the trustee”.
To summarise, there are two kinds of beneficiaries, who may be either a natural (even an unborn person) or a legal person:
- The beneficiary who is clearly identifiable by name and has a vested benefit interest in the trust; and
- The beneficiary who, although not directly named in the trust deed, belongs to an ascertainable class or a relationship to a person as provided by the deed, and is entitled to benefit from the trust in virtue of the discretion afforded to the trustee.
