TUESDAY, 13 NOV 2018



Facebook Linked In Twitter

Christodoulides Expects Lute to Return to Cyprus

Lakkotrypis Calls for Promotion of Cyprus' Special Interests within EU Free Trade Agreements



Securing Your Children’s Future with a Cyprus International Trust

Securing Your Children’s Future with a Cyprus International Trust

Recently, parents have become more sophisticated in investing their wealth to safeguard for their children’s future. More often, parents are willing and determined to start saving money for their children as soon as their baby is born (sometimes, even before the baby’s “arrival”). Typically, a parent’s primary concern is being able to pay their child’s educational costs and/or ensuring a better start for their children when they grow up and begin to purchase property or even launch their own business.

One way to accomplish their goals is to set-up a Cyprus Investment Trust (“CIT”). Trusts have been widely used as an effective tool to maintain and grow one’s assets for a quite some time now. A trust can function like an investment fund which allows a trustee to manage its assets for the good of the beneficiaries.

Trusts are also a great way for parents to ensure their disabled children are properly taken care of during their lifetime (in such cases assets/property which is held in trust may not be necessarily released to a disabled beneficiary, though such a trust will guarantee that a disabled child is properly provided for his/her needs during his/her lifetime). In any case, parents may rest assured that even in the unfortunate case of death, divorce, or bankruptcy, assets placed into a trust for children will be protected and used for the benefit of the children as prescribed in the trust instrument.

The Advantages of Setting-Up a CIT

Setting-up a Cyprus International Trust for children is easy and allows parents to tailor it to fit their unique circumstances. Parents can work with specialized lawyers to draft a tailored trust instrument that ensures their children get the best out of – steady incomeprotection of assets/property, predictable tax regime, immunity against ungrounded claims and full confidentiality.

If properly executed, a trust is a very convenient vehicle for maintaining and growing wealth in a tax-advantageous manner.  In fact, there are many advantages to having a trust. Assets which are transferred to a trust are held and managed in full confidentiality – you do not even need to indicate a particular name of a beneficiary but rather to define a class of persons who will be beneficiaries – i.e. son from the first marriage, wife, etc. Moreover, transferring assets to a Cyprus international trust would protect the assets from any claims brought by the State of the settlor’s residence.

Wealthy parents may be willing to set up a trust for children whereby the parents may distribute the inheritance upfront among heirs as they deem appropriate as an alternative to a Will. In such a case, the parents can guarantee that their children will inherit their stakes without a probate period applicable in their home jurisdiction, free of taxes attributable to the inheritance in their home country, as well as free of other claims related to the assets/property transferred to the trust.

Another advantage of creating a Cyprus international trust is to protect the assets from a beneficiary’s negligence. To this end, parents may hire a professional manager to act as the Trust Manager and authorize him/her to control and manage family assets/property in a manner that will ensure proper functioning and use of the inheritance after parents’ death (with or without immediate release of assets/property), as well as a steady income for the children. Parents have the option and discretion to include a clause in the trust that could limit the use of such income to financing only certain things defined by a trust instrument or subject to satisfaction of pre-defined criteria.

While the benefits of setting up a trust for children are many, there are important legal matters to consider in setting-up the trust. One such issue is choosing the right jurisdiction that will suit your needs. Cyprus is certainly one of the best jurisdictions to set up a trust for children given that Cyprus is an EU member, has progressive legislation and liberal tax and financial regulations. The Cyprus law that governs trusts and international trusts has evolved significantly over last couple decades. Cyprus International Trusts are governed by the 1955 Trustees Law, Cap.193, as well as the International Trusts Law of 1992 (as further amended in 2012).


How does a CIT work?

According to the Cyprus International Trusts Law, in order to set up a trust for children in Cyprus the following conditions must be met:

a settlor (parent) either natural or legal person, must not be a resident of Cyprus during the calendar year which precedes the year of trust creation. A settlor must have legal capacity to transfer assets/property to a trust, i.e. be at the time of transfer of full age and of sound mind under the law of the country of which he/she is a resident; and
child/children (even if not yet born at the moment of a trust creation) – beneficiary(ies), either an individual or legal entity(s), must not be resident (s) of Cyprus during the calendar year which precedes the year of trust creation; and
at least one of the trustees must be a Cyprus tax resident at the moment of a trust’s establishment and for the duration of it;
a trust deed must be stamped in Cyprus; details of a trust instrument, i.e. name of a Cyprus international trust, name of trustee and date of trust must be registered with one of three authorized regulators.


A trust may also involve a guardian or protector, a person other than the trustee to whom powers of any nature are conferred by the trust instrument. A guardian’s / protector’s role, powers and authorities are regulated by the trust instrument.  Although appointing a protector or a guardian is not mandatory, it can be helpful for a parent who may not have the time or know-how to manage the trust themselves.

A valid Cyprus trust must clearly state the express intention of setting up a trust for children. It further must identify the asset/property which is subject to transfer to a trust. A trust must also ensure that the beneficiaries (children, even if unborn at the time of the trust’s creation) are ascertainable or identified at the moment of a trust’s establishment. Provided a Cyprus international trust meets the foregoing criteria it shall not be void or voidable, and no claim may be made in respect thereof the assets/property unless and to the extent that it is proven to the satisfaction of the Court that the international trust was made with the intent to defraud creditors of a settlor at the time of the transfer of his/her assets to the trust. The burden of proof lies with creditors.

It should also be noted that parents may themselves play a more active role in the Trust by becoming a co-trustee and a member of a trust’s board and play a visible role as a guardian and/or protector and/or executor.  For instance, the board of directors can consist of a settlor, his/her spouse, any other trusted persons alongside a professional director that will ensure control by a settlor at board level in addition to voting rights as a trust member.

However, since the day-to-day activities of a trust may be quite challenging and require more time and effort than a settlor may be able to devote, if a settlor chooses, s/he may delegate all matters to an experienced provider of trustee and fiduciary services (as a rule, such services are provided by experienced Cypriot law firms) once a trust has been established.


By Angelos Paphitis

Managing Director

AGP Law Firm



Speed up your Client Onboarding Process with Electronic Identity Verification

Knowing Your Customer used to be about a firm handshake and a standing invitation to the ...

Brexit: Residence Rights of UK Nationals in Cyprus

On 23 June 2016, the majority of the UK's electorate voted to leave the European ...

CySEC: An Overview of the Cyprus Securities and Exchange Commission

The Cyprus Securities and Exchange Commission better known as CySEC, is the financial ...



4th International Funds Summit: Panel Discussion on Latest Examples of the Use of Cyprus in the Alternative Investment Funds

The 4th International Funds Summit took place today 12th of November at the Hilton Park Hotel in Nicosia, and welcomed leading fund managers and administration ...

Anastasiades to brief National Council on Lute-Akinci meeting

The National Council, the top advisory body to the President on the Cyprus issue, convenes this morning in Nicosia, under the President of the Repubic Nicos ...

Moody’s: CBC Directive on Shell Companies Improves Anti-Money-Laundering Practices

Moody’s rating agency says that Cyprus Central Bank’s (CBC) new directive on shell companies is credit positive for Cypriot banks, because the ...

Exectus Ltd: A Complete Solution for Accounting, Auditing and Other Financial Services

Exectus Ltd announces the commencement of its operations in Cyprus from November 2018. Exectus holds the General and Audit practicing certificates from the ...

Pound Falls as Brexit Uncertainty Rises

The pound has fallen against the dollar amid political uncertainty as Prime Minister Theresa May struggles to broker an agreement on Brexit with her cabinet. ...

Alibaba Singles Day Sales Frenzy Surpasses Records

Alibaba invented the occasion to celebrate the unattached as an antithesis to the romantically involved on Valentine's Day. It is now the world's ...

Anastasiades has Brief Contacts with World Leaders in Paris

President of Cyprus Nicos Anastasiades had a series of brief contacts with world leaders in Paris, at the margins of events commemorating the centenary of the ...

US Assistant Secretary of State for Energy Resources to travel to Jerusalem, Nicosia and Cairo

The US State Department announced that Assistant Secretary of State for Energy Resources Francis R. Fannon will travel to Tel Aviv and Jerusalem; Nicosia, and ...