Trust Formation and Trustee Services


Trusts have many applications and advantages, including the protection and preserving of assets, tax planning or just avoiding the expense and delays of obtaining probate under a will. They also provide a high degree of confidentiality.

The Isle of Man is at the forefront of best practice development in the area of trusts and was one of the first jurisdictions to introduce the regulation and supervision of trust companies. Professional trustees must be licensed under the Financial Services Act 2008 and are regulated by the Isle of Man Financial Services Authority (IOMFSA).

The Financial Services Act 2008 and the Financial Services Rulebook 2016, together with various pieces of secondary legislation, Codes and Practice Notes ensure that the Isle of Man’s regulatory regime continues to be compliant with international standards.

Isle of Man Trust legislation


The Isle of Man’s legal system is based on English common law, and its trust laws are derived from English common law and the rules of equity. Trust law was largely codified on the island in the Trustee Act 1961, which was primarily based on the English Trustee Act 1925 when a formal trust law was first introduced.

This Act was amended by various pieces of legislation including the Trust Act 2001, the Isle of Man Trusts (Amendment) Act 2015 and, most recently, the Trust and Trustees Act 2023. Under the Hague Convention, Isle of Man law trusts are recognised by the signatories to the Convention as of 1985.

The Trust and Trustees Act 2023 brought the Isle of Man trust legislation into line with contemporary trust law and practice through amendments to the existing trusts legislation and through a number of significant new additions.

Specifically, it amended the Trustee Act 2001 in respect of trustees’ duties, powers and liabilities, the Trustee Act 1961 in respect of trustees’ powers and the powers of the court, the Limitation Act 1984 in respect of actions against trust property and the Apportionment Act 1982 in respect of entitlement to income arising under a trust.

Taxation of Isle of Man Trusts


If all beneficiaries are resident outside of the Isle of Man, a trust will be exempt from both Isle of Man income tax on income arising outside the Isle of Man and income on bank deposit interest arising from within the Isle of Man. A trustee can therefore make distributions out of a trust fund established in the Isle of Man without any withholding or deduction of Isle of Man income tax.

There are no inheritance, wealth, gift or capital gains taxes levied in the Isle of Man. Other indirect forms of tax, such as stamp duty do not apply in the Isle of Man, although VAT does.

Disclosure for Isle of Man Trusts


Regulations require the Trustees to know the identity of the settlor and ultimate beneficiaries of a trust. There is no public register of trusts in the Isle of Man. The ownership of trust assets can therefore remain entirely confidential in most circumstances.

Disclosure to third parties is only required in very limited circumstances and, in certain instances, must be accompanied by a court order. This position was codified in the recent Trust and Trustees Act 2023.

Forced Heirship provisions in Isle of Man Trusts


Forced heirship laws are mandatory rules that dictate that a certain portion of an individual’s estate should pass to protected heirs, typically children, surviving spouse and other relatives. Forced heirship rules apply irrespective of the terms of the deceased’s will.

Forced heirship is generally a feature of civil-law legal systems which, in contrast to common law jurisdictions, do not recognise total freedom of testation. They are typically prevalent in continental Europe and in countries of Islamic tradition.

The Trusts Act 1995 was specifically drafted to provide that no Isle of Man trust will be invalidated simply because the trust avoids or defeats claims that may arise under forced heirship rights.

Types of Isle of Man Trust


Isle of Man law permits a variety of trusts to be established, including:

Sovereign Trust Services


Sovereign has more than 30 years’ experience of setting up and providing trust management and trust administration services for various types of trust both in the the Isle of Man and overseas. Sovereign Trust (Isle of Man) Limited is authorised and licensed by the the Isle of Man Financial Services Authority to establish trusts and provide professional trustee services in the Isle of Man.

Get in Touch

Please contact us if you have any questions or queries and your local representative will be in touch with you as soon as possible.