QFC Trusts: A Modern Approach to Wealth and Asset Management

Introduction

The Qatar Financial Centre (“QFC”) has established itself as a premier jurisdiction for the creation and management of trusts, offering a sophisticated legal framework that meets international standards. This article explores the key aspects and advantages of trusts within the QFC, providing insights into their structure, operational benefits and diverse applications for local and international stakeholders.

1. Legal Framework for Trusts in the QFC

The legal framework for trusts in the QFC is built on a comprehensive and modern set of regulations that align with international best practices. This section provides an overview of the QFC Trust Regulations 2007 (the “QFC Trust Regulations”), the key legislation governing trusts in the QFC. The QFC Trust Regulations provide a robust legal framework for the establishment, governance and administration of trusts within the QFC. A trust is distinguishable from a foundation, which is a separate legal entity common in civil law jurisdictions while a trust creates a fiduciary relationship favored in common law jurisdictions. In this section, we highlight the flexibility of the QFC’s trust regime to meet the diverse needs of global investors and asset managers.

1.1 Definition of a Trust

A trust in the QFC is a legally binding relationship created by a settlor through which trust property is held in the name of the trustee (or another person on behalf of the trustee) who exercises, in relation to the property, duties and powers in accordance with the governing law of the trust and the terms of the trust for either or both of the following: (A) the benefit of a beneficiary whether or not yet ascertained or in existence; (B) any valid purpose that is not for the sole benefit of the trustee.

1.2 Key Parties to a Trust

The key parties to a trust include i) the settlor, the person or entity establishing the trust, (ii) the protector, a person who has particular powers of the settlor, (iii) the trustee, the entity responsible for holding, administering and managing the trust assets and (iv) the beneficiaries, the individuals or entities entitled to benefit from the trust’s assets or income. 

1.3 Types of Trusts

Under the QFC Trust Regulations, trusts may be established as discretionary, purpose or protective trusts, offering tailored solutions for wealth management and asset protection. Trusts can operate a business or hold and manage assets in the same manner that a person or a legal entity can do with beneficial interests distinct from legal interests.

Below are the key characteristics of trusts established in the QFC:

• Trust property constitutes a separate fund and is not a part of the trustee's own estate.
• A trust is governed by the law of the jurisdiction explicitly defined within the trust instrument. Accordingly, the governing law of the trust instrument may be the laws of the QFC or a foreign law outside of Qatar.

1.4 Establishment of a Trust

The establishment of a trust in the QFC is a streamlined process with specific legal and administrative requirements.

The following requirements must be met to set up a trust in the QFC:

• Trust Instrument. A trust instrument must be prepared to document the trust’s purpose, ensuring it is lawful, not contrary to public policy and achievable. The trust instrument should Identify key parties, including the settlor, trustee(s) and beneficiaries (or, in the case of purpose trusts, the designated purpose); and explicitly articulate provisions for administration, distribution and termination of the trust.
• Establishment. Trusts in the QFC must be registered by the trustee with the QFC Authority (“QFCA”). The registration process involves submitting the trust instrument and supporting documentation to the QFCA, as prescribed under the QFC Trust Regulations to document the trust’s purpose, terms, trustees and beneficiaries and to ensure compliance with the QFC’s AML and financial transparency requirements. On registration of a trust, the QFC issues a certificate confirming that the trust is registered as a trust.
• Duration and Modification. Trusts established under the QFC Trust Regulations can have a perpetual duration unless the trust instrument states otherwise. Modification, variation, or revocation of a trust is permitted under conditions specified in the trust instrument or as directed by the Qatar International Court and Dispute Resolution Centre (“QICDRC”).
• Legal Protections. The QFC Trust Regulations adopt the common law of trusts and principles of equity from England and Wales as supplementary rules to fill gaps or address issues not explicitly covered by the QFC Trust Regulations. The QFC Trust Regulations include provisions that protect trust property from creditors in the event of a settlor’s or beneficiary’s financial difficulties, particularly in discretionary trusts.

1.5 Trust Operations and Asset Management

When dealing with the operation of trusts and the management of trust assets, the QFC Trust Regulations establish clear duties, powers and protections to ensure efficient and transparent administration while safeguarding the interests of beneficiaries.

Governing Trust Operations

A trust must at all times have at least one trustee. The trustee retains overall responsibility for ensuring the terms of the trust are executed appropriately. However, the trustee may delegate certain functions to agents or co-trustees, provided such delegation aligns with the trust's terms and fiduciary duties. A trustee who acts in good faith is indemnified from the actions of “agents” it appoints.

Trustees may combine or divide trusts if this action benefits the administration of the trust and does not impair beneficiaries' rights. This ability ensures a straightforward execution of trust terms, while potentially eliminating impediments which may arise.

Asset Management

Trustees have broad powers to manage trust property and assets, while also maintaining accurate and detailed records of all transactions related to the trust. Trustees must manage assets prudently, considering the trust’s objectives, terms and circumstances. This involves balancing risk and return while preserving the trust's long-term value.

Trustees may buy, sell, lease or mortgage trust property as necessary to fulfill their duties and enhance the trust’s assets. Trustees may insure the property being held on trust against any potential risks arising. Trustees may allocate trust income or principal to beneficiaries as permitted by the trust terms.

Disputes and compromising claims involving trust property are expected to be managed and settled by trustees. Trustees are required to ensure that the trust property is kept separate from their personal assets, while upholding definite and precise records to avoid the rise of potential conflicts of interests.

1.6 Register of Trusts

The QFCA maintains a Register of Trusts, which includes the name and registered number of the trust, the objects of the trust and the names of the trustee. The Register of Trusts provides a mechanism for monitoring trust activities while safeguarding the privacy of involved parties and verifying the establishment of a trust in accordance with the QFC Trust Regulations. The Register is not open to public inspection, ensuring the privacy of settlors, trustees and beneficiaries. Only authorized bodies, such as the QICDRC or regulatory authorities, may access the register under specific legal circumstances.

2. Key Parties to a Trust

The QFC Trust Regulations cover the duties and powers of a settlor and trustee, distinguish relations among trustees and define the rights and interests of a beneficiary. This section explores the interplay of key parties to a trust and demonstrates how the QFC Trust Regulations provide an effective governance framework to ensure that the objectives of the trust are clearly defined.

2.1 Settlor

The settlor is the person or entity that establishes the trust by transferring assets into it. The settlor plays a fundamental role in determining the terms and purpose of the trust. Article 61A of the QFC Trust Regulations presents a unique feature pursuant to which the settlor may reserve certain rights to itself, including the right to  retain specific, reserved powers, such as the ability to modify the trust or appoint trustees, provided these rights are explicitly reserved in the trust instrument.

2.2 Protector

Under the QFC Trust Regulations, the QFC recognizes the role of a protector, a person who has particular powers of the settlor conferred onto them by virtue of the trust instrument. The protector is not to be conflated with the settlor. The settlor holds the power to appoint new protectors.

2.3 Trustee

The trustee is responsible for holding, administering and managing the trust property in accordance with the terms of the trust and the QFC Trust Regulations, for the benefit of the beneficiaries and the stated purpose. Trustees may exercise a range of powers, including the ability to invest trust property, delegate duties or merge trusts, as long as these actions are consistent with the trust terms and QFC trust law.

The duties of the trustee comprise the following:

• Fiduciary Duty. Trustees must act in good faith, in accordance with the trust's purpose and with the interests of beneficiaries in mind.
• Administration. Trustees are tasked with preserving trust property, providing reports and ensuring compliance with legal and trust-specific obligations.
• Impartiality. Trustees must act impartially among beneficiaries unless the trust terms specify otherwise.

Who can be a trustee in the QFC?

• A licensed QFC firm that is a Designated Non-Financial Business or Profession.
• A firm authorised with the Qatar Financial Centre Regulatory Authority.
• A duly licensed person that is approved by the QFCA or authorized in any other jurisdiction.

How are trustees appointed?

• The trust instrument usually specifies the initial trustee(s).
• To accept trusteeship, the person must substantially comply with the method of acceptance provided in the trust instrument. If no method is provided, acceptance can be shown by taking delivery of trust property, exercising trustee powers, performing trustee duties or otherwise indicating acceptance.

To what extent can a trustee be held liable?

A trustee is liable for a breach of trust committed by the trustee or in respect of which the trustee has granted its approval. A trustee who is liable for a breach of trust is liable for the loss or depreciation in value of the trust property resulting from such breach; and the profit, if any, which would have accrued to the trust property if there had been no such breach. A trustee is not liable for a breach of trust committed by a co-trustee, unless the trustee was aware or actively concealed such breach. Parties dealing with trustees in good faith are protected from liability related to misuse of trust property, facilitating smooth transactions and efficient trust operations.

Trustees can protect themselves from liability as follows:

• Exculpatory Clauses. The trust instrument may include provisions limiting the trustee’s liability for ordinary negligence, although such clauses cannot protect against gross negligence or willful misconduct.
• Beneficiary Consent. Trustees are protected from liability if beneficiaries, with full knowledge, consent to or ratify the trustee’s actions.
• Personal Liability Limitations. Protection from personal liability is granted to trustees during transactions conducted on behalf of the trust, provided they clearly disclose their fiduciary capacity as trustees and act within the scope of their authority.

2.5 Beneficiary

Beneficiaries are individuals or entities entitled to benefit from the trust's assets or income, either through distributions or as part of a stated purpose.Beneficiaries have enforceable rights against the trustee, including the right to receive distributions and access to information about the trust's administration. Beneficiaries can disclaim their interest in the trust if they choose.Beneficiaries are protected against trustee misconduct through the QICDRC’s oversight, which can intervene to ensure the trust is administered fairly and according to its terms.

3. Advantages to Setting up a QFC Trust

3.1  Key Advantages

The QFC trust framework offers unparalleled advantages for both local and foreign investors, including full ownership rights, asset protection and a favorable tax environment. These features position the QFC as an ideal jurisdiction for investors seeking efficient, secure and private trust solutions. This section explores the key advantages that make the QFC a premier jurisdiction for trust creation, focusing on its flexibility, privacy protections and unique benefits for foreign investors. Below we set out the notable features for setting up a trust in the QFC:

Feature	QFC Trust Framework
Succession Planning	Commonly used vehicle for inheritance and family asset planning and permits Shariah-compliant structuring.
Legal Safeguards	Asset protection to safeguard wealth.
Confidentiality	Trust documents are not publicly available.
Foreign Trustee	Foreign trustee may hold assets in trust with common law principles for equitable governance.
Tax Benefits	Ability to apply for tax exempt status in certain circumstances. No withholding tax.
Flexibility	Ability to tailor trust to meet specific circumstances.

Succession Planning 

A trust is a flexible vehicle to enable the distribution of assets to beneficiaries by reference to a class or a relationship to some person, and it can be structured in a manner that is compliant with Shariah principles. The creation of a trust and its terms must be for the benefit of its beneficiaries, making it a suitable vehicle for succession planning. Heirship rights will not be recognised as affecting the ownership of property. Trust assets may include a wide range of property, such as investment assets, real estate, financial instruments and movable property, providing investors with comprehensive estate planning tools.

Legal Safeguards

The QFC Trust Regulations provide legal safeguards to protect assets held in trust. For example, assets held in discretionary trusts are shielded from creditor claims, enhancing asset protection. In addition, the QICDRC has the power to adjust a trustee’s compensation specified in the terms of the trust which is unreasonably low or unreasonably high. A protector may also be appointed as an additional layer of protection by having powers to, among others, remove trustees, appoint new trustees and give or withhold consent to specified actions of the trustee.

Confidentiality 

The QFC maintains a confidential administrative and operational regime to safeguard trust documents and to protect the interests of founders and beneficiaries, while adhering to anti-money laundering (“AML”) standards. Beneficiaries and settlors can structure their interests through the trust instrument without public disclosure, enabling discrete asset management and estate planning.

Foreign Trustee

The QFC allows foreign trustees to hold trust assets for the benefit of one or more beneficiaries without requiring a local partner or sponsor. This ensures complete control over the management and disposition of trust property, with the exception of real estate property in non-designated areas which must be Qatari-owned in accordance with applicable law.

Tax Benefits

Under the QFC Tax Regulations, a trust can apply for tax-exempt status if it qualifies as a Special Investment Fund and meets specific regulatory and operational requirements. This tax neutrality enhances the trust’s appeal for investors, particularly for cross-border investment and fund structuring. In addition, there are no withholding tax obligations on distributions or payments made by a QFC trust to beneficiaries or other recipients. This makes QFC trusts attractive for international investors having cross-border assets as it reduces administrative burdens and maximizes income received for beneficiaries.

Flexibility

The QFC provides flexibility in determining the form and type of trust and tailoring provisions in the trust instrument according to specific wishes and changing circumstances. A trust may be revocable. Trusts may operate indefinitely unless limited by the terms of the trust instrument. The governing law of the trust instrument may be the laws of the QFC or a foreign law outside of Qatar.

3.2 Practical Implications

Trusts established under the QFC Trust Regulations offer a versatile legal structure that can be adapted to serve the needs of individuals, families and organizations to meet diverse objectives.

Wealth Management and Succession Planning

Trusts are ideal for protecting family wealth, ensuring smooth intergenerational transfer of assets and minimizing disputes for high-net-worth individuals and families. Trusts provide a structured way to distribute income or capital to beneficiaries over time, adhering to the settlor’s wishes. Trust property is legally distinct from the settlor’s or trustee’s personal assets, safeguarding assets from creditors or external claims. In addition, segregating assets into a trust framework in the QFC provides for tax-efficient estate planning, particularly in managing cross-border assets.

Corporate and Investment Structuring

Trusts also serve as vehicles for consolidating corporate shares or holding significant assets such as intellectual property, providing a more simplified management and ownership structure. Businesses and investors often use trusts to pool funds in collective investment schemes, or alternatively, to oversee certain aspects of a business to ensure the operations are aligned with the intended strategy, benefiting from tax neutrality and legal protections. Establishing a trust in the QFC can also provide an effective means for segregating private investments in an offshore vehicle and protecting assets from creditors or litigation as well as facilitating off-balance sheet transactions in asset finance when used in orphan structures.

Purpose Trusts

In the QFC, a purpose trust may be established for non-charitable causes to meet a specific purpose. Unlike traditional trusts, a purpose trust can operate without having identifiable beneficiaries as it exists to carry out a specific purpose rather than to provide a benefit to particular individuals. Examples typically include maintaining a particular property, holding shares in a business or funding the preservation of unique assets such as artwork or antiques.

4. Key Takeaways

The legal framework for trusts in the QFC is meticulously designed to offer clarity and protections for all parties involved.

Incorporating the principles of common law and equity ensures a modern approach to trust governance through the QFC Trust Regulations. The framework provides the foundation for effective trust establishment and administration, making the QFC a reliable and attractive solution for stakeholders.

The adaptability of QFC trusts allows them to address diverse needs, from wealth preservation to corporate structuring. The QFC offers significant flexibility in trust establishment, providing a platform fit for individuals and entities seeking innovative solutions for managing and safeguarding assets.

We would like to thank Paralegal Kareem Abu Roza for his contribution to this publication.