The main difference between a variation and a revocation of a trust is that, whilst variation allows the power to revoke certain terms under a trust and introduce new ones, revocation allows the power to terminate the rights under a trust indefinitely, thereby revoking the trust.
There are multiple instances where the terms of a trust can be changed from those terms established at the creation of the trust. Such variation can take place for various reasons, including but not limited to:
- Tax mitigation;
- Tax planning;
- Cost benefit reasons;
- Beneficiary needs.
Varying the original terms of the trust is therefore possible. However, this remains subject to article 14 of the Trusts and Trustees Act (Chapter 331 of the Laws of Malta) (the “TTA”), which provides that any variation terms remain yet subject to the powers vested by the TTA upon the Court for the variations of the terms of trust.
It should be noted that, as per article 15(1)(b) of the TTA, anything which is lawfully done by the trustee before the receipt by the said trustee with regard to the notice of the variation of the trust terms, is not prejudiced by such variations.
On the other hand, revocation of a trust can be effected either wholly or partly. A revocation takes place as long as there is an express power within the said trust that caters for revocation. Similar to the rule discussed above under Article 15(1)(b) of the TTA, Article 15(1)(a) of the TTA also states that anything which is lawfully done by the trustee in relation to the trust before the receipt by the said trustee of the notice of the revocation of the trust, is not prejudiced by such revocation.
Articles 15(2) and (3) of the TTA provide that if a trust is revoked wholly or in part, the trust property to that revocation shall be held by the trustee “in trust for the settlor absolutely”. All settlors, in case there is more than one, must expressly consent to the revocation of the trust.
It is important to note that as a default position, a trust cannot be revoked or varied unless the trust instrument itself expressly provides for such possibility.
Feel free to contact us should you require any further information on the above.
