How is wealth traditionally passed on to future generations?
In Mauritius there are 3 types of wills commonly used namely holographic will (private deed), the public will that is drawn up before a notary in presence of witnesses and the secret will whereby a sealed envelope is handed to a notary in presence of witnesses.
Traditionally in Mauritius the concept of wills as a succession planning vehicle is more popular with ultra-wealthy individuals rather than the majority of the population.
Accordingly, wealth and assets are traditionally passed to the next generation through a transfer – before death or after death – through complicated and costly legal proceedings involving a notary.
What is the alternative to a Will?
One of the best alternatives to the use of wills is through the creation of a trust.
What is a Trust?
The origin of trusts can be found in the eleventh century crusades. Crusading English knights left their manors and estates in the care of trusted friends for safekeeping while they were away on crusade.
A trust is a fiduciary relationship in which one party, known as a testator (settlor), gives another party, the trustee, the right to hold title to property or assets for the benefit of a third party, the beneficiary.
Trusts are established to provide legal protection for the trustor’s assets, to make sure those assets are distributed according to the wishes of the trustor, and to save time, reduce paperwork and, in some cases, avoid or reduce inheritance or estate taxes.
A trust can be set up to hold all the assets of the testator (settlor) for the benefit of beneficiaries. The Trust is managed by a professional Trustee like Rogers Capital duly licensed by the FSC in Mauritius. Upon the death of the testator (settlor), the Trustees will ensure the wealth and assets are managed for the benefit of the beneficiaries as per the wishes of the testator (settlor).
How is a Trust more flexible than a will?
A will needs to be constantly updated for changes in circumstances e.g the birth a child, divorce, the death of an heir. A will can be modified, cancelled or rewritten as many times as the testator wishes before his death by means of an addendum called a codicil drafted by a notary which shall amend, rather than replace, a previously executed will..
A Trust however allows for modifications to be made more quickly e.g. if testator (settlor) wants to add or remove beneficiaries, testator (settlor) can give a new letter of wishes to the Trustees.
As compared to a will for a Trust there are no significant additional notary fees / redrafting fees incurred when making such changes.
What are the advantages of setting up a Trust by Mauritian Citizens?
Mauritius is a forced heirship jurisdiction and Mauritius legislation provides for a portion of the estate of the deceased who was domiciled in Mauritius to be reserved for his children. However, the unreserved or available portion of the estate of a deceased can be freely settled into a Trust.
A Trust created by a Mauritian citizen provides greater flexibility in terms of management, implementation of changes and distribution of assets to beneficiaries as compared to a will.
What are the advantages of setting up a Trust for Non -Mauritian Citizens?
For non-Mauritians, setting up a Trust in Mauritius may provide significant advantages as follows:
- All income of the trust taxed at 0% if all trust parties are non-Mauritians
- No withholding tax on distribution made to beneficiaries
- No tax on dividends received from Mauritius Companies
- Mauritius not part of European Union – Not bound by European Directives on Disclosures
- Trusts based on common law and Mauritius Trust Act 2001 follows closely UK and other Commonwealth countries legislation.
- Highest Court of Appeal – Privy Council in UK
- No forced heirship rules for Trust set up by foreigners
- Creditors cannot claim if trust property settled for more than 2 years
- Trusts are protected from claims from foreign courts in respect of bankruptcy and the personal and proprietary consequences of marriage or the dissolution of marriage
Please get in touch with us if you have any questions or want to know more on how a Trust can be of use for your succession planning/asset protection needs.